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Markets raise chances for a Fed rate hike following hot inflation report

CNBC · May 12, 2026, 5:33 PM · Also reported by 4 other sources

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  • Traders moved further away Tuesday from expecting any Federal Reserve interest rate cuts and in fact began anticipating a higher probability that the next move would be a hike.
  • Instead, they priced in a better than 1-in-3 chance of an increase by the end of this year, as expectations rose that cost of living concerns would outweigh any worries about the labor market deteriorating.

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Traders moved further away Tuesday from expecting any Federal Reserve interest rate cuts and in fact began anticipating a higher probability that the next move would be a hike.

Following a hotter-than-expected inflation report, market pricing took virtually any chance of a cut off the table between now and the end of 2027, according to the CME Group's FedWatch tracker of 30-day fed funds futures contracts.

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