CME odds for 2026 Fed hike jump

BlockFlow said on May 22 that CME market pricing for a Federal Reserve rate hike in 2026 had climbed to roughly 45% from about 1%, citing CME FedWatch probabilities in a post on X. CME says its FedWatch tool tracks the likelihood of policy moves using prices in 30-Day Fed Funds futures. The move came after a run of inflation-related headlines this month and as Treasury yields stayed elevated. BlockFlow also pointed to the 10-year Treasury yield, which has been trading near one-year highs, as a related risk signal. ### What exactly is moving when people cite “CME odds” for a Fed hike? CME Group says FedWatch is a probabilities tool built from 30-Day Fed Funds futures prices, which traders use to express views on future Federal Reserve policy. The probabilities are not a Fed forecast and not an official central-bank signal; they are a market-implied reading of where traders think the target rate could be at specific Federal Open Market Committee meetings. The key point in BlockFlow’s post was not a policy decision by the Fed. The shift was in market pricing — a repricing of expected outcomes for 2026. Bloomberg reported on May 5 that traders were already increasing wagers that the Fed’s next move could be a hike rather than a cut. ### Why would hike odds rise instead of cut odds? (cmegroup.com) Reuters reported on May 22 that Nomura now expects the Fed to leave rates unchanged in 2026 because higher inflation and less support among officials for easing have reduced the chance of near-term cuts. Reuters also reported on May 20 that divisions among policymakers over inflation and the rate path would be visible in minutes from what it described as the most divided meeting in a generation. (bloomberg.com) Federal Reserve Governor Christopher Waller said in an April 17 speech that temporary tariff effects had complicated the inflation picture and that conflict-related energy shocks could have lasting effects on inflation and growth if prolonged. Waller said he watches inflation expectations closely and noted that longer-term expectations had not shown the same rise as near-term measures. (msn.com) ### Why does the 10-year Treasury yield matter here? The U.S. Treasury’s daily yield data show the 10-year constant maturity yield has been running in the mid-4.5% range in May. Third-party market data cited by Investing.com show the 10-year yield reached 4.687% on May 19, the highest reading in that series over the past month, and Trading Economics showed it at about 4.57% on May 22. (federalreserve.gov) CNBC reported on May 15 that the 10-year Treasury yield had risen to about 4.595% as traders repriced the policy outlook after inflation data. Higher long-dated yields can accompany a market view that policy may stay restrictive for longer, though that interpretation belongs to market participants rather than the yield itself. (home.treasury.gov) ### Is this the same thing as saying the Fed will hike in 2026? CME’s own description makes clear FedWatch is a market-based probability tool, not a promise about what policymakers will do. A 45% implied probability still means traders see multiple paths ahead, including no hike. Reuters’ May 22 report on Nomura and Reuters’ April poll both pointed to a policy debate still centered on whether rates stay unchanged or ease later, not a settled consensus for tightening. (cnbc.com) That leaves market pricing sensitive to each new inflation print, labor-market report and Fed communication. ### What should readers watch next if they want to track this story? (cmegroup.com) CME FedWatch updates will show whether traders keep adding to hike bets or reverse them after new data. Treasury yield screens — especially the 10-year note — will show whether longer-term borrowing costs keep climbing. Federal Reserve speeches, meeting minutes and the next set of inflation data will provide the named public events most likely to move those probabilities. (msn.com) (cmegroup.com)