Traders boost US rate-hike bets on hawkish Fed

BloombergLast Updated: Jun 20, 2026, 07:48:00 AM IST

Synopsis

Traders are now fully anticipating a quarter-point interest rate hike from the Federal Reserve by September, a shift driven by renewed inflation worries fueled by a surge in oil prices. New Fed Chair Kevin Warsh's firm stance against high inflation has bolstered these expectations. This development occurred amidst quiet trading, with US markets closed for a holiday.

Traders added to wagers for Federal Reserve interest-rate hikes, fully pricing a quarter-point increase by September after a spike in oil prices revived inflation concerns.

Swaps tied to policy-meeting dates imply 25 basis points of hikes, up from 23 basis points on Thursday and eight basis points earlier in the week. The move came during thin trading volumes with US markets closed for a public holiday.

Investors are pricing in tighter policy from the Fed after new Chair Kevin Warsh said the central bank won't tolerate high inflation at his first meeting this week, sending yields higher on Wednesday. Oil has climbed by around 4% from a three-month low on Thursday as doubts linger around the recently signed peace deal between the US and Iran.

"We're now at a point where it wouldn't take much to tip the balance in favor of a hike," said Matthew Ryan, head of market strategy at Ebury, pointing to the rhetoric at this week's Fed decision. "Multiple references to the Fed missing its inflation target for five years running, all support the narrative that higher rates may not be too far away."

Investors hadn't expected Warsh to strike such a hawkish tone. US President Donald Trump elevated him to the central bank post after repeatedly lashing out at his predecessor, Jerome Powell, for not slashing borrowing costs enough.

Meanwhile, Brent crude steadied after topping $80 a barrel earlier in the session. Israel and Hezbollah reportedly agreed to a ceasefire starting Friday.

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