Markets Are Now Pricing a 25% Shot the Fed Actually Raises Rates

The Fed’s rate-cut party may be turning into a wake. Fueled by oil prices surging past $100 after the US-Iran conflict, Wall Street is reviving the once-unthinkable possibility of another Fed hike. Traders now see roughly a 25% chance of a hike by year-end, a sharp shift from the near-certain cuts priced in just weeks ago.

• Before the conflict, markets expected June and September cuts — now traders see just one in December, with easing pushed to 2027–28.
• Goldman Sachs economists warned that “a higher inflation path will make it harder for the Fed to start cutting soon,” shifting its forecast from June to September.

Threading a very tight needle: Despite the hawkish repricing, most economists still expect the Fed to hold steady at its Mar. 18 meeting. High Frequency Economics’ Carl Weinberg says a hike may be needed to prevent inflation from accelerating, while former Fed official Vincent Reinhart urges patience as Middle East tensions unfold. With job growth averaging just 6K over the past three months, the Fed is trapped between stubborn inflation and an economy already running out of steam.