Markets begin eyeing Fed rate hike around turn of year

After a run of hotter-than-expected inflation data this week, investors on Friday ramped up bets that the U.S. Federal Reserve will shift into interest-rate hiking mode perhaps before the year is out, presenting a potential policy dilemma out of the starting gate for incoming central bank leader Kevin Warsh. The probability that the Fed’s benchmark interest rate would be 25 basis points higher by January’s Federal Open Market Committee meeting was up to around 60% and a hike as early as December was seen as a coin toss, according to CME’s FedWatch. The Fed under outgoing Chair Jerome Powell has held its policy rate in the 3.50% to 3.75% range since December, and despite inflation that has persistently run above its 2% target, it has continued to use language in its policy statement suggesting its next move was likely to be a rate cut. A growing body of policymakers, however, has begun arguing for a change in stance, and three officials dissented against April’s policy statement over the continued inclusion of an easing bias. A readout of that meeting due on Wednesday may indicate how ma