Hottest Inflation In Over 3 Years: Is The Fed Ready To Hike Interest Rates?

The hottest U.S. inflation reading in more than three years did little to shift the consensus among economists ahead of next week’s Federal Reserve meeting: hold rates, lean hawkish, and wait out the Iran-driven energy shock.
The May Consumer Price Index rose 0.5% on the month and accelerated to 4.2% year-over-year, the highest since April 2023, as the Strait of Hormuz shock fed through to energy prices.
Core CPI ticked up to 2.9% on a tamer 0.2% monthly gain. Both readings matched expectations.
What The Market Is Pricing For The Fed
CME FedWatch tool data implies roughly a 98% probability the Fed holds its target range on June 17, though futures now price a 25-basis-point hike by December.
On Polymarket, the odds of at least one 2026 rate hike sit near 52%.

Iran War Drove May Inflation