September Rate Hike Probability Rises to 55.7%

Following comments made by Federal Reserve Chair Kevin Warsh at Jackson Hole, the probability of a rate hike in September has increased to 55.7%. Ahead of the FOMC meeting on September 15-16, the market has reflected the Fed's concerns about inflation. In a speech on August 28, Warsh emphasized the 2% PCE inflation target, stating that core inflation must move sufficiently towards this goal. The Fed had kept the benchmark interest rate steady at 3.50-3.75% during the FOMC meeting on July 29, noting that inflation was above the 2% target at that time. The PCE price index for July rose 3.7% year-on-year, while core PCE increased by 3.3%. Warsh's remarks were interpreted as increasing uncertainty regarding the policy path rather than the decision on rates. The market reacted immediately in a hawkish manner, raising the probability of a September rate hike from 35.4% to 55.7%, and the yield on U.S. two-year Treasury notes rose by 11 basis points. In the crypto market, Bitcoin fell below $78,000. However, this movement does not imply that a rate hike is confirmed, as the probability had dropped to 48-50% following comments from Governor Waller in early September. The next FOMC meeting is scheduled for September 15-16.

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