The television channel broadcasts Kevin Warsh, chairman of the US Federal Reserve, speaking after the meeting of the Federal Open Market Committee (FOMC) held at the New York Stock Exchange (NYSE) in New York, US, on Wednesday, June 17, 2026.
Michael Nagle Bloomberg | Getty Images
Investors are increasingly preparing for the Federal Reserve to raise interest rates as oil prices rise.
Fed funds futures are priced at about 82% that the central bank will raise borrowing costs at its September policy meeting, according to CME’s FedWatch tool. In the previous week, those errors remained below 53%.
The central bank is still expected to keep rates unchanged at 3.50% to 3.75% when it meets next week. But still, there is a growing possibility of a few more hikes: Trading in Fed funds futures shows a nearly 38% chance of a quarterly percentage increase, up from less than 12% last week.
BrentThe global crude oil benchmark hit $100 a barrel on Thursday for the first time since late May amid a new round of tit-for-tat tensions between the US and Iran. The average price of a liter of gasoline in the US reached $4 per liter this week – the highest in more than a month, according to AAA.
Thursday’s employment data reinforced the view that the Fed may be more focused on inflation — which could accelerate as energy prices rise — than the health of the labor market.
Initial jobless claims fell to 187,000 in the week ended July 18, the Labor Department reported. Those were the fewest requests since 1969, when the US population was 60% of what it is today.
“Currently, the outlook for economic growth is showing signs of overstretching if today’s weekly unemployment figures are to be believed,” said Christopher Rupkey, chief economist at FWDBONDS. “But the question will be for how long if electricity prices continue to rise.”
An expected increase in rate hikes could add downward pressure to the stock market on Thursday, according to Larry Tentarelli, chief technical expert at the Blue Chip Daily Trend Report. That’s on top of a spike in oil prices and Treasury yields, as well Alphabets‘s post-wage swoon, he said.
It’s a blue-chip The Dow Jones Industrial Average down more than 600 points in mid-day trading. I Nasdaq Composite – is heavily weighted in technology stocks that are sensitive to higher borrowing costs – spend around 3%.
“You have a strong storm right now,” Tentarelli said.
Nasdaq Composite, 1 day
“We have the Fed meeting in six days, and I think investors shouldn’t rush to buy anything,” he added. “There are times when you can just sit and be patient.”
‘Learning’
Market participants looking for information about the Fed’s outlook are watching it closely 2 years US Treasury Express. The yield, which rose more than 6 basis points on Thursday, provides “a read on what the Fed might do next,” said Ross Mayfield, investment strategist at Baird.
US 2-year Treasury, 1-month
While Mayfield said investors don’t need to worry about an interest rate hike next week, September feels like a “live” Fed meeting.
Kalshi traders have similarly increased their bets on a September rate hike in recent days. The probability of such a move at that meeting rose to 48% by midday Thursday, up from about 30% last week.
To be sure, the economists’ interest rate outlook through 2026 does not indicate an environment with tight monetary policy.
The consensus forecast remains that the Fed will not raise rates this year, according to FactSet. By 2027, economists expect the central bank to lower borrowing costs by half a point.
– With additional reporting by CNBC’s Sean Conlon
