Fed rate hike odds surge to 90% on monthly jump in core prices

Core inflation data came in hotter than expected, shifting market expectations sharply toward another Federal Reserve rate increase. Futures pricing now reflects a 90% probability that policymakers will hike rates at their next decision, up substantially from prior assessments. The stronger-than-anticipated inflation reading suggests the central bank's efforts to cool price pressures have not yet succeeded as intended, potentially requiring extended periods of higher rates to bring inflation back to target.

• Surprise upside in core inflation has reversed prior assumptions about an imminent pause in rate hikes, forcing investors to recalibrate their economic outlook.
• Extended monetary tightening, if sustained, could pressure asset valuations and reshape the risk-on sentiment that has supported risk assets including crypto.
• The inflation persistence signals the Fed may need to maintain restrictive policy longer than markets had anticipated, complicating the recovery narrative.