October Hike Odds Jump to 71%; Xi at the White House
The market now sees another rate hike in October as the likelier outcome. Fed funds futures put a 71% chance on at least a 25-basis-point hike next month. A day earlier the figure was around 50%.
Two things moved the pricing. The first was Wednesday's S&P Global flash PMI. The September composite rose to 58.4 from 56.0, the highest reading since July 2021.
The real signal was on prices. The input-cost index jumped to 66.4 from 59.9, its highest since October 2022. Most of the increase came from fuel and transport costs.
The second came from London this morning. New York Fed President John Williams said another hike by year-end may be appropriate: "That seems to me a reasonable way of thinking about it."
The bond market had already priced it. The 10-year Treasury yield topped 5.10% on Wednesday, its highest since 2007. The 30-year yield hit 5.39%, the first time at that level since 2004.
The market did not read the PMI as a growth story.
It read it as an inflation story.
Oil is pushing the same way. At the UN, Iranian President Masoud Pezeshkian said Iran would not surrender, and US talks showed no sign of progress. Brent rose 3.9% on Wednesday to settle at $103.08.
