Probability of Interest Rate Hike in September Rises to 58%

The probability of a U.S. interest rate hike in September has risen to 58%. This change follows remarks made by Federal Reserve Chairman Kevin Warsh at Jackson Hole, which have been interpreted as the Fed not closing the door on tightening. In his speech on the 28th, Warsh referred to the 2% target for personal consumption expenditures (PCE) inflation as a 'firm and fixed goal' and emphasized the need for confidence that inflation is coming down at a 'clear and sufficient pace' toward that target. The PCE price index for July rose by 3.7% compared to the previous year, while core PCE increased by 3.3%. The Fed held the benchmark interest rate steady at 3.50-3.75% during the FOMC meeting on July 29. The bond market reacted in two stages, with the yield on 30-year Treasury bonds rising from 5.21% on July 29 to 5.28% on July 31. Following the Jackson Hole remarks, the probability of a September hike increased from 35% to between 57% and 60%. The yields for 2-year, 10-year, and 30-year bonds rose to 4.34%, 4.72%, and 5.206%, respectively. The next FOMC meeting will be held on September 15-16.

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