Fed Rate Hike Probability Hits 50% as Markets Await CPI

Swap markets price a 50% chance of a September rate hike following weak NFP data. Reduced forward guidance forces reliance on hard data, creating asymmetric risk around upcoming CPI figures.

Woofun AI data shows that swap market activity reflects a 50% probability of a 25-basis-point rate hike in September. Following unexpectedly weak July non-farm payroll data, pricing has split evenly on whether the Federal Reserve will raise rates. Under Warsh's leadership, the Federal Reserve has significantly reduced forward guidance, compelling the market to rely on hard data for policy direction.

The impact of July's CPI data is asymmetric. Moderate inflation could weaken the case for a hike, while higher-than-expected data would make a September hike the baseline scenario. The 10-year U.S. Treasury yield has tilted toward a scenario where moderate CPI drives yields down, driven by resonance between macro data and CTA positioning strategies.