TLDR
- Markets now price a 70% chance the Fed raises rates at its September 16 meeting
- August producer price index rose 0.4%, pushing annual wholesale inflation to 5.4%
- U.S. crude oil crossed $100 a barrel, adding to inflation pressure
- The 10-year Treasury yield climbed to 4.92%, its highest since the financial crisis
- Friday’s consumer price index report could push odds even higher or pull them back
A spike in wholesale prices and oil topping $100 a barrel have pushed the chances of a Federal Reserve rate hike next week to 70%, with markets also pricing in a possible second increase before year-end.
Wholesale Prices and Oil Drive Rate Hike Bets
Markets now price a 69.8% chance of a 25-basis-point hike at the September 16 Federal Open Market Committee meeting, up from 61.2% on Wednesday, according to CME Group’s FedWatch tool.
JUST IN:
🇺🇸FED is now projected to hike interest rates in 6 days
Odds have just jumped to 69.8% after the PPI inflation data release
This is not good for markets… pic.twitter.com/ss99dETqeB
— ᴛʀᴀᴄᴇʀ (@DeFiTracer) September 10, 2026
The shift came after the producer price index rose 0.4% in August. That followed an upwardly revised 0.1% gain in July, pushing the annual PPI rate to 5.4%.
At the same time, U.S. crude oil jumped 4% to just over $100 a barrel. Rising oil prices tend to feed through to broader inflation, giving the Fed another reason to act.
The European Central Bank also moved on Thursday, raising rates by a quarter point and lifting its inflation forecast. The ECB cited the ongoing conflict with Iran as a risk to longer-term consumer prices.
Jeffrey Roach, chief economist at LPL Financial, said inflation pressures are becoming entrenched. He called a September hike likely given current conditions.
David Russell, global head of market strategy at TradeStation, pointed to the combination of rising oil and low jobless claims. He said it was hard to see the Fed staying on hold next week.
Treasury Yields Rise as Markets Reprice Fed Path
The benchmark 10-year Treasury yield climbed 7 basis points to 4.92% following the PPI data. That is its highest level since the financial crisis.
Traders also lifted the odds of a second hike in December to close to 60%. That reflects concern that inflation will not fall fast enough for the Fed to pause for long.
Bank of America senior economist Stephen Juneau said core personal consumption expenditures are tracking at a 0.26% monthly rate for August. Rounded up, that would be 0.3%, which he said should be enough to greenlight a hike.
Bank of America has one of the most hawkish forecasts on Wall Street, expecting three hikes at upcoming meetings.
Peter Boockvar, chief investment officer at One Point BFG Wealth Partners, warned that a soft consumer price index reading on Friday would not mean inflation is under control. He said pipeline pressures shown in PPI data tell a different story.
The consumer price index for August is due Friday. The Dow Jones consensus calls for a headline annual rate of 3.4% and a core reading of 2.4%.
Fed Chairman Kevin Warsh has said the PCE price index remains the Fed’s official inflation gauge. Core PCE stood at 3.3% in July.
Friday’s CPI report is now the final data point before policymakers decide.
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