Karshi traders believe the Federal Reserve is now more likely to raise interest rates this year after central bank policymakers signaled they could do so.
The probability that the Fed will raise rates in 2026 was 57% on Wednesday night, up from 35% on Monday, according to the prediction market platform.
Kalsi traders also see a 72% chance of a rate hike by July 2027 and an 85% chance of a rate hike by 2028.
On Wednesday, the policy-setting Federal Open Market Committee decided to keep interest rates in a target range of 3.5% to 3.75%, a move that was widely expected based on the federal funds futures market.
However, central bank officials also hinted at the possibility of rate hikes, changing their previous outlook for rate cuts this year. Nine of the 18 participating officials expect the federal funds rate to end in 2026 above its current range. The median forecast calls for the federal funds rate to end the year at 3.8%.
Federal Reserve Chairman Kevin Warsh, in his first meeting at the helm of the central bank, refrained from providing an outlook for interest rates through a closely watched “dot plot.”
“I didn’t score myself,” Warsh said at a press conference after the meeting. “It’s not useful for policy management.”
The central bank’s hawkish tendencies were also reflected in its post-meeting statement, which was overhauled and ultimately removed language suggesting future interest rate cuts.
Warsh noted that the committee’s statement was brief compared to past statements.
“It’s a little shorter, a little simpler, and doesn’t need the old wording,” he says. “That statement only represents the facts to the best of our ability.”
The next committee meeting is scheduled for July 28-29.
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