← United States Government Bond 10Y overview

United States Government Bond 10Y vs Effective Federal Funds Rate: why the prices moved differently

Weekly · monthly · quarterly news summaries, side by side in time

United States Government Bond 10Y (US-10Y.GB)

Latest
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10-year yield hits 5.34% on war-driven oil, then eases on soft PCE and weak jobs

  • Trump rejects Iran peace plan; oil and yields spike Trump refused Iran's truce offer and did not rule out new strikes, pushing oil up about 3% and the 10-year yield to 5.27%, highest since 2007. War-driven energy costs keep inflation high, so investors demand more yield to hold long-term bonds.

    This is the main new force pushing yields to multi-year highs this period.

  • Global bond selloff and record quarterly yield jump The 10-year yield reached 5.34%, the highest since 2002, and rose 87.1 basis points in the quarter, the biggest since 1994. Heavy government borrowing and expectations central banks stay tight push yields up worldwide, dragging the US 10-year higher.

    Shows the scale and global nature of the selloff driving US yields.

  • Soft PCE inflation cuts October rate-hike odds August PCE inflation came in below forecasts (3.4% headline, 3.0% core), and markets cut the chance of an October Fed hike to about 37% from 51%. Lower expected rates make existing bonds more attractive, pulling the 10-year yield down to 5.217%.

    This is the first real counterweight this period, easing upward yield pressure.

  • Weak September jobs data boosts Fed-hold bets Nonfarm payrolls rose only 29,000 versus 89,000 expected, and unemployment rose to 4.2%. Markets now price an 84% chance the Fed holds rates in October, up from 36% a week earlier, pulling the 10-year yield down to 5.180%.

    This is the latest and strongest new force pulling yields lower at period end.

Q3 2026
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10-Year Treasury Yield Hits 24-Year High on Inflation, Fed Hike, Oil

  • Inflation and Fed Rate Hike Inflation near 3.3% and the first Fed rate hike in three years under hawkish Chair Warsh pushed the 10-year Treasury yield to a 24-year high of 5.34%. Higher rates make existing bonds less valuable, so prices fell.

    This is the main new driver of the yield surge and bond price decline.

  • Oil Spike and Record Global Bond Selling Oil above $100 due to the US-Iran conflict and record global bond selling driven by $40 trillion in US debt added upward pressure on yields. Investors demanded higher returns to hold bonds, pushing prices down.

    These are new external pressures that contributed to the yield rise.

  • Weak Economic Data and Fed Dissent Weak July payrolls (-23,000), soft retail sales, consumer confidence and PCE data, falling oil on ceasefire hopes, and Fed dissent from Waller pulled yields down, supporting bond prices. Political pressure for rate cuts also helped.

    These are new counterweights that limited the yield rise and supported prices.

  • Treasury Buybacks Doubled Treasury buybacks doubled to $4 billion per operation, supporting bond prices. However, Fed balance-sheet tensions and reduced communication added uncertainty, keeping yields elevated.

    This is a new policy action that directly supported bond prices.

September 2026
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10-Year Treasury Yield Hits 24-Year High on Fed Hike, Oil Spike

  • Fed rate hike and hawkish stance The Fed raised interest rates for the first time in three years, and Chair Warsh signaled more tightening ahead. This pushed the 10-year Treasury yield up sharply as investors expected higher rates for longer.

    This is the primary new driver of the yield surge in September.

  • Oil above $100 on US-Iran conflict Oil prices jumped above $100 per barrel due to the US-Iran conflict, raising inflation fears. Higher expected inflation erodes the value of bond payments, so investors demanded higher yields, pushing the 10-year yield up.

    This is a new geopolitical shock that added upward pressure on yields.

  • Hot inflation and record global bond selloff Inflation data came in hotter than expected, and a record global bond selloff intensified as investors worried about $40 trillion in US debt. These forces drove the 10-year yield to a 24-year high of 5.34%.

    This explains the extreme yield level and global market dynamics.

  • Counterweights: soft data and Fed dissent Soft PCE and weak payrolls cut October hike odds to 16%, while Fed's Waller urged caution and political pressure for cuts grew. These factors pulled yields down from their peak, ending September near 5.18%.

    This shows the real counterweight that prevented yields from staying at the high.

▲3

Hot economy, hawkish Fed and oil push 10-year yield to 19-year high

  • Strong September PMI and hawkish Fed officials lift rate-hike odds US business activity hit a 5-year high in September, and Fed officials Barr, Goolsbee, Paulson and Williams all backed further rate hikes. Markets now price about a 70% chance of an October hike. Higher expected rates make existing bonds less attractive, pushing the 10-year yield above 5% to a 19-year high.

    This is the main new force this period: strong data plus hawkish Fed talk sharply raised rate-hike expectations, directly lifting the 10-year yield.

  • Oil stays above $100 as Iran war drags on, feeding inflation The US-Iran conflict entered its seventh month with no exit, keeping Brent crude near $106 and gasoline near $5 a gallon. JPMorgan gave up forecasting oil prices. High energy costs keep inflation high, so investors demand more yield to hold long-term bonds, pushing the 10-year yield up.

    The ongoing oil shock is a key new driver keeping inflation and yields elevated, and it shows no sign of easing.

  • Global bond selloff sends long-term yields to multi-decade highs The 30-year Treasury yield hit 5.48%, a 22-year high, and Japan's 10-year yield reached 3.115%, a 30-year high. Heavy government borrowing and expectations that central banks stay tight are pushing yields up worldwide, dragging the US 10-year yield to 5.22%.

    This shows the move is global, not just US, and reinforces upward pressure on the 10-year yield.

  • US-China trade truce extended, but diesel export ban plan adds uncertainty The US and China extended their trade truce to January 2027, which could ease inflation pressure and pull yields down. But the White House is considering a 90-day diesel export ban to lower fuel prices before midterms, a wildcard that could either calm or worsen energy markets.

    This is a genuine counterweight: the truce reduces one inflation risk, but the diesel ban plan adds uncertainty that could keep yields volatile.

▲3

Fed's first hike in 3 years pushes 10-year Treasury yield above 5%

  • Fed hikes rates and signals more to come The Fed raised its key rate by a quarter point to 3.75%-4.00%, its first hike in three years, and most officials expect at least one more this year. Higher expected rates make existing bonds less attractive, pushing the 10-year yield up.

    This is the central new event of the period and the main force lifting the 10-year yield.

  • Oil above $100 on Middle East supply fears Attacks on Saudi oil facilities and shipping pushed Brent above $107 and US crude above $105. Higher energy costs feed inflation worries, so investors demand more yield to hold long-term bonds, pushing the 10-year yield up.

    Oil-driven inflation fears are a key new force keeping upward pressure on yields.

  • 10-year yield tops 5%, highest since 2007 The 10-year Treasury yield crossed 5% for the first time since 2007, as markets priced in a near-certain Fed hike. Rising global debt worries and heavy government borrowing add to the upward pressure on long-term yields.

    This is the headline market outcome of the period and shows the scale of the move.

  • Some warn rate hikes won't fix supply-driven inflation Economists like Mark Zandi and TISCO note that energy and tariff shocks are supply problems rate hikes can't solve, and the Fed may be 'painted into a corner.' That doubt can cap how high yields go, even as the hike itself pushes them up.

    This is the real counterweight: it explains why the yield rise may be limited or reversed if the hikes are seen as ineffective.

▲3

Oil shock and hot inflation data push 10-year Treasury yield toward 5%

  • Oil spike above $100 on US-Iran conflict fuels inflation fears Renewed US-Iran fighting and attacks on Saudi oil facilities pushed Brent crude above $105, its highest in months. Higher energy costs feed inflation, making investors demand more yield to hold long-term bonds, pushing the 10-year yield up to near 5%.

    This is the main new force this period driving yields higher through inflation expectations.

  • Hot PPI and CPI data lift September rate-hike odds to about 70% Producer prices came in firmer than expected and August CPI showed core prices rising 0.3% month-on-month, above forecasts. Markets now see a roughly 70% chance the Fed hikes rates on September 16, and higher expected rates make existing bonds less attractive, pushing the 10-year yield up.

    This is the key new data point that shifted rate expectations and directly moved yields.

  • Treasury buybacks fail to cap yields as debt tops $40 trillion The Treasury bought back only $5.19 billion of bonds versus the $6 billion planned, and received just $10 billion of offers versus the usual $20 billion. Weak demand signals investors want higher yields, and with US debt past $40 trillion and $8.4 trillion needing refinancing, heavy borrowing keeps upward pressure on the 10-year yield.

    This shows the counterweight (buybacks) is failing, which is new and important for the big picture.

  • Political pressure for rate cuts clashes with Fed independence concerns Vice President Vance and President Trump pushed for rate cuts, with Trump threatening to halt trade if the Fed doesn't comply. This political interference raises doubts about the Fed's independence, which can push yields up as investors demand extra compensation for uncertainty, even as the calls for cuts pull in the opposite direction.

    This is a new political development that adds uncertainty and affects the yield through Fed credibility concerns.

▲3▼1

Warsh's hawkish Fed and oil spike push 10-year yield to 2023 high

  • Warsh's Jackson Hole speech fuels September rate-hike bets Fed Chair Warsh's first Jackson Hole speech was seen as hawkish, saying the Fed has 'work to do' if inflation doesn't fall. Markets now price a 60-66% chance of a September rate hike, up from about 35%. Higher expected rates make existing bonds less attractive, pushing the 10-year yield up.

    This is the main new force this period, directly driving rate-hike expectations and yields.

  • US-Iran conflict lifts oil, adding to inflation worries Renewed US-Iran fighting pushed oil above $90 a barrel, with Brent near $95. Higher energy costs feed inflation fears, making investors demand more yield to hold long-term bonds. The 10-year yield rose above 4.75%, its highest since late 2023.

    Oil-driven inflation fears are a key new driver pushing yields higher this period.

  • Global bond selloff sends yields to multi-year highs Government bond yields jumped worldwide, with Japan's 10-year hitting 3% for the first time since 1996 and Germany's at a 15-year high. Heavy government borrowing and expectations that central banks stay tight for longer pushed the US 10-year yield to 4.81%, a near three-year high.

    This shows the global scale of the selloff and reinforces upward pressure on US yields.

  • Waller hints Fed may hold, and strong jobs data keeps hike debate alive Fed Governor Waller said the Fed could 'wait one meeting' and give disinflation a chance, briefly pulling the 10-year yield down to about 4.75% and cutting hike odds to 50%. But strong August jobs data (162,000 vs 55,000 expected) quickly pushed hike odds back to 60%, keeping yields elevated.

    This is the main counterweight: a possible Fed hold that briefly lowered yields, though strong data limited the relief.

August 2026
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Inflation, Fed hawkishness, and debt worries pushed 10-year Treasury yields higher in August

  • Inflation and Fed hawkishness Inflation stayed near 3.3%, and Fed Chair Warsh signaled a tough stance on prices, raising the chance of a September interest-rate hike. That pushed long-term bond yields up.

    This is a key new driver of higher yields in August.

  • Fiscal worries and heavy borrowing US government debt passed $40 trillion, with heavy borrowing and a global savings squeeze. Investors demanded higher yields to hold long-term bonds, adding upward pressure on rates.

    This new fiscal development pushed yields higher.

  • Weak economic data and lower oil July jobs fell by 23,000, retail sales and consumer confidence were soft, and oil prices dropped on US-Iran ceasefire hopes. These factors pulled yields down by suggesting slower growth and less inflation.

    This new data provided downward pressure on yields.

  • Treasury buybacks and Fed uncertainty Treasury doubled buybacks to $4 billion per operation, supporting bond prices, but tension with the Fed over balance-sheet shrinkage and reduced Fed communication raised uncertainty. Investors demanded extra yield, keeping rates elevated.

    This new mixed factor influenced yields in both directions.

▲2▼1

Treasury buybacks vs. Warsh's rate-hike signal: yields end higher

  • Treasury doubles long-bond buybacks to push yields down The Treasury expanded purchases of 10- to 30-year government bonds from $2 billion to $4 billion per operation, starting September 9, and may use its $950 billion cash account. Buying bonds lifts their price and lowers the 10-year yield, though the effect faded as investors doubted it fixes the debt load.

    This is the main new force pulling the 10-year yield down this period.

  • Warsh's Jackson Hole speech lifts September rate-hike odds Fed Chair Warsh said the Fed has 'work to do' if inflation doesn't clearly fall to 2%, and financial conditions aren't restrictive. Traders raised the chance of a September hike to about 55-60% from 35%. Higher expected rates make existing bonds less attractive, pushing the 10-year yield above 4.7%.

    This is the biggest new upward force on the 10-year yield this period.

  • Global savings squeeze and debt worries keep long-term yields high Heavy government borrowing, trade disruptions, aging costs and AI investment are all competing for the same lending money, a shift from a savings glut to a savings squeeze. With US debt past $40 trillion and deficits large, investors demand more yield to lend long-term, keeping the 10-year yield elevated.

    This explains the persistent upward pressure that buybacks alone cannot offset.

  • Treasury-Fed clash leaves bond investors uncertain The Treasury's buybacks work against the Fed's inflation fight, and Warsh gave little guidance on future policy. Investors demand extra yield for that uncertainty, which pushes long-term yields up, while the buybacks themselves pull yields down. The two forces leave the 10-year yield volatile around 4.65-4.72%.

    It shows the real counterweight that keeps the net direction from being one-sided.

▲2▼1

Treasury buybacks clash with inflation and debt fears, yields stay high

  • Inflation stubborn, Fed minutes signal possible hikes Core inflation stuck near 3.3% and Fed minutes showed many officials ready to raise rates if it doesn't fall. Higher rates make existing bonds less attractive, pushing the 10-year yield up.

    This is the main force keeping upward pressure on yields.

  • US debt tops $40 trillion, fiscal worries grow US government debt passed $40 trillion for the first time, with a $1.8 trillion deficit this year. Heavy borrowing and rising interest costs push yields up as investors demand more to lend.

    Fiscal deterioration is a key new driver of higher yields.

  • Treasury doubles bond buybacks to cap yields The Treasury unexpectedly doubled its buybacks of long-term bonds to $4 billion per operation, aiming to support demand and lower yields. The 10-year yield fell to about 4.65% before rebounding.

    This is the main counterweight pushing yields down.

  • Treasury-Fed tension raises uncertainty Treasury's intervention conflicts with Fed Chair Warsh's plan to shrink the Fed's balance sheet, raising questions about Fed independence. Investors demand extra yield for the uncertainty, keeping upward pressure on long-term rates.

    This policy clash adds a new layer of uncertainty affecting yields.

▼2▲1

Weak jobs and retail data cut rate-hike odds, pulling 10-year yields down

  • Weak July jobs report slashes September rate-hike odds US employers cut 23,000 jobs in July, far below the expected gain, and prior months were revised lower. Investors now see only about a 30-44% chance of a September Fed rate hike, down from 67%. Lower hike odds make existing bonds more attractive, pulling the 10-year yield down.

    This is the main new force this period: a weak labor market directly reduces the chance of higher rates, which lowers the 10-year yield.

  • Weak retail sales and consumer confidence reinforce rate-hike retreat July retail sales fell 0.6%, the first drop in nine months, and consumer confidence weakened. Traders now assign a 71% chance the Fed holds rates steady in September. Fading growth worries reduce the need for higher rates, pushing the 10-year yield down.

    This is a new development that further reduces rate-hike expectations, adding downward pressure on yields.

  • Rising oil and Iran tensions stoke inflation fears, lifting yields Oil rose for a fourth day as the US prepared new sanctions and a blockade against Iran, reducing hopes of reopening the Strait of Hormuz. Higher energy costs feed inflation worries, pushing the 10-year yield up to around 4.68%.

    This is a new geopolitical development that adds upward pressure on yields by raising inflation concerns.

▲2▼2

Fed rate-hike fears push yields up, then weak jobs data pulls them back

  • Fed signals possible rate hikes as inflation stays high Fed Chair Warsh said he has 'no tolerance' for inflation and is ready to raise rates in September if inflation accelerates. Three officials already voted to hike. Higher rates make existing bonds less attractive, pushing the 10-year yield up.

    This is the main new force driving yields higher this period.

  • Warsh cuts communication, markets demand higher compensation Warsh gave no rate guidance and may reduce the number of yearly Fed meetings. Investors call this a credibility problem and are selling long-dated bonds, demanding extra yield for the added uncertainty. The 30-year yield hit its highest since 2007.

    It explains why long-term yields rose even without an actual rate hike.

  • US-Iran ceasefire hopes cut oil prices and bond yields Trump canceled planned strikes on Iran and talks to reopen the Strait of Hormuz progressed, sending oil down sharply. Lower energy costs ease inflation fears, so the 10-year yield fell to about 4.67% as investors bought bonds.

    It is the main new force pulling yields down this period.

  • Weak jobs report slashes odds of a September rate hike The US economy lost 23,000 jobs in July, far below the expected gain. Investors now see about a 60% chance the Fed holds rates steady in September, up from 33% a week earlier. The 10-year yield fell to 4.61%.

    It is the latest and most direct new data point pulling yields down.

Effective Federal Funds Rate (EFFR.MM)

Q3 2026
▲1▼1

Fed hikes once, but weak data and political pressure cap further increases

  • First Fed rate hike since 2023 The Fed raised its benchmark rate to 3.75–4.00%, the first increase since 2023, citing strong jobs, sticky inflation, and oil above $100. It signaled one more hike could come.

    This was the main event that directly raised the effective federal funds rate during the quarter.

  • Weak data and political pressure flip October odds to hold After the hike, below-forecast inflation, a weak September jobs report, a Fed official's dissent, and Trump's pressure for cuts flipped October hike odds from 70% to about 84% for a hold, capping expected rates.

    This shows the counterweight that prevented further rate increases and pushed expectations down.

  • Rate-hike odds swung on mixed data and Fed signals Early in the quarter, weak July payrolls and soft retail sales cut September hike odds to ~29%, but hawkish Fed minutes and Warsh's Jackson Hole speech revived them to 55–60%, keeping the path unclear.

    This explains the back-and-forth in expectations that set the stage for the eventual hike.

September 2026
▲3▼1

Fed hikes to 3.75–4.00% as inflation risks persist

  • Fed delivers first hike since 2023 The Fed raised rates to 3.75–4.00%, the first hike since 2023, driven by strong jobs, sticky inflation, and oil above $100. Officials signaled one more hike in 2026.

    This is the main event that directly moved EFFR.

  • Hawkish data and rhetoric lift hike odds Blowout August jobs, strong PMI, and hawkish Jackson Hole remarks pushed September hike odds to ~87%. Officials largely backed further tightening, lifting October hike bets to ~70%.

    Explains the forces that drove expectations higher into the hike.

  • Late data and political pressure cap hikes Below-forecast PCE and a weak September jobs report flipped October odds toward a hold (~84%). Waller dissented and Trump pressured for cuts, pulling expected rates down.

    Shows the counterweight that limited further tightening.

  • Oil above $100 keeps inflation risk alive Oil above $100 and tough official rhetoric kept inflation risk—and a floor under EFFR—alive, even as late data softened the outlook.

    Highlights a persistent force supporting higher rates.

Latest
▲2▼2

Hot inflation data and weak jobs report flip October rate-hike odds from 70% to hold

  • Below-forecast PCE inflation sharply cuts October hike odds August PCE inflation came in at 3.4% year-on-year, below the 3.7% expected, with core at 3.0% versus 3.3% forecast. That eased inflation worries and raised the chance the Fed holds rates steady in October to about 63% from 49% a day earlier, lowering expected EFFR.MM.

    This is the first major data surprise that reversed the market's rate-hike expectations, directly pushing EFFR.MM lower.

  • Weak September jobs report makes an October hold very likely September nonfarm payrolls rose only 29,000, far below the 89,000 expected, and unemployment rose to 4.2%. Investors now price an 83.9% chance the Fed holds rates at 3.75–4.00% in October, up from 35.8% a week ago, pulling expected EFFR.MM down.

    This is the latest and most decisive data point that slashed near-term rate-hike expectations, a direct negative for EFFR.MM.

  • Oil above $100 and Middle East conflict keep inflation risk alive Brent crude topped $108 after the US rejected Iran's peace proposal, and the Strait of Hormuz remains largely closed. Higher oil prices feed inflation, which could force the Fed to hike later, keeping upward pressure on EFFR.MM even as near-term odds fell.

    This is the main counterweight: it explains why EFFR.MM doesn't just collapse despite weak jobs and soft PCE.

  • Fed officials still talk tough on inflation, but data now rules Governors Cook and Barr and regional presidents Williams and Logan said inflation is still too high and more hikes may be needed, with Williams seeing one more late this year. That keeps a floor under EFFR.MM, though markets now bet the Fed will wait.

    It shows the policy bias remains hawkish, a positive force for EFFR.MM that balances the negative data surprises.

▲4

Fed Officials and Hot Data Drive October Rate-Hike Bets Sharply Higher

  • Fed officials line up behind more hikes Chicago Fed's Goolsbee, Governor Barr, Philadelphia Fed's Paulson and New York Fed's Williams all said this week that rates likely need to go higher to bring inflation down to 2%. When voting and influential officials say this, investors expect the actual rate to rise, pushing EFFR.MM up.

    Multiple Fed officials explicitly signaling more hikes directly raises the expected path of the fed funds rate.

  • Strong September PMI data lifts October hike odds to ~70% The September flash PMI jumped to 58.4, a five-year high, showing the economy is running hot. That makes the Fed more likely to hike again, and markets now price about a 70% chance of a quarter-point increase at the October 27-28 meeting, up from 55% a week earlier. Higher expected rates lift EFFR.MM.

    The PMI surprise is the key new data point that shifted market odds for an October hike sharply higher.

  • Investors now bet on two more hikes in 2026 After the strong data and official comments, traders raised bets to a 66% chance of an October hike and a 50% chance of another in December, up from 55% and 42% a week ago. If both happen, the fed funds rate would rise to 4.25-4.50%, pulling EFFR.MM higher.

    This shows the market's expected path for the fed funds rate has shifted up, which is what EFFR.MM tracks.

  • AI investment boom adds to inflation pressure Goolsbee and Paulson both warned that massive AI data-center spending is boosting demand beyond what the economy can supply, keeping inflation sticky. If the Fed sees AI as an inflation driver, it may need higher rates to cool other spending, which supports a higher EFFR.MM.

    A new structural force (AI-driven demand) that could keep upward pressure on rates even if other inflation sources fade.

▲3

Fed Hikes Rates to 3.75–4.00%, Signals One More in 2026

  • Fed delivers first rate hike in three years, raises target to 3.75–4.00% The Fed raised its benchmark rate by 0.25% to 3.75–4.00% on September 16, the first hike since 2023, in a unanimous 12-0 vote. This directly lifts the effective federal funds rate, which tracks the Fed's target range.

    This is the actual policy decision that sets the EFFR, making it the most important driver of the period.

  • Fed signals one more hike in 2026, higher-for-longer path The Fed's dot plot shows 16 of 18 officials expect at least one more hike this year, with the median year-end 2026 rate at 4.1%. This tells investors rates will stay higher for longer, keeping upward pressure on EFFR.MM.

    Forward guidance about future hikes shapes expectations for where EFFR will go next, beyond the current move.

  • Oil above $100 and sticky inflation force Fed's hand Crude oil surged past $100–$108 on Middle East supply fears, and core inflation remains near 3.4%. These price pressures make the Fed more likely to keep raising rates, pushing EFFR.MM higher.

    Inflation and oil are the root causes forcing the Fed to hike, explaining why EFFR is moving up.

  • Trump pressures Fed to cut to 1%, but Warsh defends independence After the hike, Trump urged the Fed to cut rates to 1% or lower, calling the hike political. But Warsh has defended Fed independence, so this is a real but uncertain counterweight that could lower EFFR.MM if it sways policy.

    This is the main opposing force that could push EFFR down, providing a fair counterweight to the hike.

▲3▼1

Strong Jobs and Sticky Inflation Push September Rate-Hike Odds to ~87%

  • Blowout August Jobs Report Lifts Rate-Hike Odds The U.S. added 162,000 jobs in August, nearly triple the 53,000 expected, and unemployment held at 4.1%. That strength tells investors the economy can handle higher rates, so the odds of a September Fed hike jumped from about 49% to 58% and kept climbing. Higher expected rates lift EFFR.MM.

    This is the first major new data point this period that reset rate expectations upward.

  • Firmer PPI and Hot Core CPI Push Hike Odds to ~87% Producer prices rose 5.4% year over year, above the 5.3% expected, and August core consumer prices rose 0.3% for the month, hotter than the 0.2% forecast. With inflation still sticky, traders now price an 85.8% chance of a quarter-point hike on September 16, up from 72.4% a day earlier. Higher expected rates lift EFFR.MM.

    This is the latest and most decisive new inflation data that drove hike odds sharply higher.

  • Trump Pressures Fed to Cut, Threatens Trade Measures President Trump threatened to suspend trade with surplus countries if the Fed doesn't cut rates before the September 15-16 meeting, and his advisers called a hike 'reckless.' This political pressure could sway the Fed to hold or cut, which would lower EFFR.MM. But Chair Warsh has defended Fed independence, so the effect is a real but uncertain counterweight.

    This is a genuine counterforce that could pull rates down, and readers need to see it alongside the hike odds.

  • War and AI Boom May Blunt Rate Hikes, But Fed Still Expected to Move Analysts warn that Fed rate hikes may have limited effect on inflation driven by the Iran war, tariffs, and massive AI investment, which are less sensitive to interest rates. Even so, the Fed has signaled readiness to hike and futures price roughly 70% odds, so the expected funds rate remains elevated. This keeps upward pressure on EFFR.MM.

    It explains why the Fed is still expected to hike despite doubts about its effectiveness, supporting the upward move in EFFR.MM.

▲3▼1

Warsh's hawkish Jackson Hole pushes September rate-hike odds to ~60%, but Waller's dissent and weak inflation data keep it a coin toss

  • Warsh's Jackson Hole speech lifts September rate-hike odds to ~60% Fed Chair Warsh's first Jackson Hole keynote was hawkish: he said the Fed will 'have work to do' if inflation isn't clearly heading to 2%, and rejected forward guidance. Markets now price a 55-66% chance of a September hike, up from ~35% before the speech. Higher expected rates lift EFFR.MM.

    This is the main new event of the period and directly raises the expected federal funds rate.

  • Barclays and other analysts now forecast two hikes (Sept and Dec) Barclays reversed its call and now expects the Fed to raise rates in both September and December, each by 25 basis points. Other banks also see more tightening ahead. This adds to expectations of a higher policy rate, pushing EFFR.MM up.

    New analyst forecasts reinforce the upward pressure on expected rates.

  • Oil surge on US-Iran conflict adds to inflation and hike pressure Renewed US-Iran fighting pushed Brent above $90 and WTI above $85, raising inflation concerns. Higher oil prices make the Fed more likely to hike to fight inflation, which lifts the expected federal funds rate.

    A new geopolitical supply shock that feeds into inflation and rate-hike expectations.

  • Waller signals he may support holding rates steady Fed Governor Waller said he could support holding rates steady at the September meeting, urging markets to 'give disinflation a chance.' His comments cut hike odds from 63% to about 50%, lowering the expected federal funds rate. This is a real counterweight to Warsh's hawkish stance.

    A key dissenting voice that reduces the probability of a hike, balancing the positive drivers.

August 2026
▲1▼1

Rate-hike odds swung on weak data and hawkish Fed signals

  • September rate-hike odds whipsawed Early August, traders saw higher odds of a Fed rate hike due to tough talk and high inflation. Then weak jobs and sales data cut those odds to about 29%, before Fed minutes and Warsh's speech pushed them back to 55-60%.

    This directly explains the sharp swings in rate expectations that drove EFFR pricing during the period.

  • Weak economic data lowered hike odds July payrolls fell by 23,000, retail sales dropped, and consumer confidence was soft. These signs of a slowing economy made traders bet the Fed would not raise rates, pulling expected rates down.

    It shows the key data that pushed rate-hike odds lower, a major force on EFFR expectations.

  • Hawkish Fed signals revived hike bets Fed minutes showed growing support for rate hikes, and Warsh's Jackson Hole speech reinforced that view. This lifted September hike odds back to around 55-60%, supporting higher expected rates.

    It captures the Fed communication that reversed the earlier decline in rate-hike odds.

  • Other forces kept rate path uncertain Treasury bond buybacks, doubts about Fed credibility, less forward guidance, a shrinking Fed balance sheet, and a global savings squeeze all pulled in different directions, leaving the net rate path unclear.

    It highlights the counterweights that prevented a clear direction for EFFR, balancing the narrative.

▲2

Warsh's Jackson Hole Speech Makes a September Rate Hike the Base Case

  • Warsh's Jackson Hole speech jolts rate-hike odds to ~60% Fed Chair Warsh said the Fed will 'have work to do' if inflation isn't clearly heading to 2%, and that financial conditions aren't restrictive. Traders now price about a 55-60% chance of a September hike, up from roughly 35% before the speech. Higher expected rates lift EFFR.MM.

    This is the period's decisive new event: it directly reset market odds for the fed funds rate.

  • Hammack and other officials push for immediate tightening Cleveland Fed President Hammack said the Fed is far from its inflation target and should tighten now; she was one of three July dissenters who voted to hike. Officials openly backing hikes reinforce the market's move toward expecting higher rates.

    It shows the hike signal is not just Warsh's personal view but has committee support.

  • Treasury bond buybacks and global savings squeeze pull the other way The Treasury doubled purchases of long-dated bonds to push yields down, which could offset Fed tightening and delay a hike. But a global savings squeeze and heavy AI borrowing are pushing long-term yields up anyway, so the net effect on expected rates is uncertain.

    It is the real counterweight: it could soften the case for hikes even as inflation stays high.

▲2▼1

Fed Minutes Reveal Growing Push for Rate Hikes

  • Fed minutes show many officials now favor rate hikes The July Fed meeting minutes revealed that many officials believe rate hikes will be needed if inflation stays above 2%. Three officials already voted to hike. This makes traders expect higher rates ahead, pushing the expected federal funds rate up.

    This is the most direct and important new signal about the future path of the federal funds rate.

  • Core inflation stuck near 3.3% keeps pressure on Fed Core inflation, which strips out food and energy, remains near 3.3% — well above the Fed's 2% goal. Tariffs and supply-chain issues keep prices high. This persistent inflation forces the Fed to consider raising rates, lifting the expected funds rate.

    Persistent core inflation is the fundamental reason the Fed may hike, directly driving rate expectations.

  • Weak retail sales cut odds of near-term hikes July retail sales fell 0.6%, the first drop in nine months and worse than expected. Consumers are pulling back, which slows the economy. This makes traders bet the Fed will hold off on hiking until at least December, lowering the expected funds rate.

    Weak consumer spending is a key counterweight that reduces the urgency for rate hikes.

  • Treasury buybacks and Fed silence add uncertainty The Treasury is doubling buybacks of long-term bonds to lower yields, but JPMorgan warns it may not work and could raise long-term rates. Meanwhile, the Fed's lack of guidance and possible credit downgrade add volatility. The net effect on the expected funds rate is unclear.

    This shows a real counterweight and uncertainty that could push rate expectations in either direction.

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Rate-Hike Odds Fade as Jobs and Consumer Data Weaken

  • Weak July jobs report cuts September hike odds July payrolls fell 23,000, far below the expected 85,000 gain, and prior months were revised lower. Investors now see a September rate hike as much less likely, with odds falling from 67% to around 40-44%. This lowers the expected federal funds rate.

    This is the main new data point that shifted market expectations for the Fed's next move.

  • Weak retail sales and consumer confidence push hike odds even lower July retail sales fell 0.6%, the first drop in nine months and the biggest in 14 months, badly missing forecasts. Consumer confidence also weakened. By August 14, traders saw only a 28.6% chance of a September hike, down from above 50% a week earlier, as investors bet rates stay at 3.50%-3.75%.

    This is the newest data showing the consumer is slowing, which directly reduces the chance of a rate hike.

  • Fed officials and BofA still point to higher rates Kansas City Fed President Schmid said policy may need to tighten further, and three Fed officials voted to hike in July. Bank of America expects 75 basis points of additional hikes in 2026, bringing the rate to 4.25%-4.50%. This keeps upward pressure on the expected funds rate.

    This is the main counterweight: not everyone agrees the Fed is done, and some still expect hikes.

  • Warsh's communication shift and balance-sheet plans tighten policy Chair Warsh is reducing forward guidance and wants to shrink the Fed's $6.75 trillion balance sheet. Both moves can push long-term rates higher even without raising the official funds rate. This adds to uncertainty and keeps upward pressure on borrowing costs.

    This explains a new way the Fed could tighten policy beyond just changing the funds rate target.

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Fed hike bets surge on inflation, then weak jobs data flips odds to a hold

  • Fed officials signal readiness to hike rates Multiple Fed officials, including Governor Cook and three FOMC dissenters, said they are prepared to raise rates if inflation stays high. Chair Warsh also said he has 'no tolerance' for elevated inflation and is ready to hike in September if data confirm rising prices. This pushes the expected federal funds rate up.

    Directly raises the expected path of the policy rate, which is what EFFR tracks.

  • Inflation stays high on tariffs and Iran war Inflation is running at a three-year high of 4.2%, driven by Trump's tariffs on over 80 countries and the Iran war that closed the Strait of Hormuz, pushing energy and input costs higher. This persistent inflation forces the Fed to consider rate hikes, lifting the expected federal funds rate.

    Explains the underlying inflation pressure that is driving the Fed toward rate hikes.

  • Weak July jobs report slashes rate-hike odds July payrolls fell by 23,000, far below expectations, and prior months were revised lower. Investors now see a September rate hike as less likely, with the probability dropping from 67% to around 40-44%. This lowers the expected federal funds rate.

    Directly reduces the probability of a near-term rate hike, pulling the expected policy rate down.

  • Fed credibility doubts cut both ways Markets question the Fed's commitment to fighting inflation, with long-term bond yields rising and critics saying Warsh's tough talk lacks action. Some warn this could force the Fed to hike more later to regain credibility, while others see it as a reason the Fed may hold off. The net effect on the expected funds rate is uncertain.

    Shows a real counterweight: credibility concerns could push rates up or down, making the overall direction mixed.

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