- Fed rate hike expectations surge after robust payrolls report
- December hike probability jumps to 63% from 48% pre-data
- Kalshi traders see 64% chance of a hike before July 2027
Markets Reprice as Labor Market Defies Slowdown
Stronger-than-expected US jobs data has upended market expectations for Federal Reserve policy, with rate futures now pricing a 63% probability of a December hike, up sharply from 48% before the release. The shift reflects a more resilient economy and reduced bets on near-term cuts.
On Kalshi, a prediction market platform, traders are assigning a 64% likelihood of a rate increase before July 2027, with odds trending higher. The data points to sustained wage and employment momentum that could keep inflation pressures alive, forcing the Fed to maintain its tightening bias.
Inflation Fears Resurface
“The labor market is simply not cooperating with the Fed’s desire to pause,” said one fixed-income strategist. Robust job creation and low unemployment readings bolster the case for higher-for-longer rates, even as growth shows signs of cooling.
Market participants now expect fewer rate cuts in the coming quarters, and some are hedging against the possibility of additional tightening if inflation proves sticky. The next CPI and PCE releases will be critical in shaping the policy path.
Broader Implications
Higher rate expectations could weigh on equities and support the dollar, while bond markets may continue to adjust to a more hawkish outlook. The data-dependent Fed is likely to stress patience, keeping markets on edge.
Correction: An earlier version misstated the Kalshi timeframe; it is for a hike before July 2027.