Fed Funds Futures Price 50% December Rate Hike as 30-Year Treasury Yield Tops 5%

9 articles · Updated · Reuters · May 19

Fed funds futures now imply roughly 50% odds of a December rate increase, even though the Fed held rates at 3.50%-3.75% in April and officials have not signaled hikes.
The repricing followed a bond selloff that pushed the 30-year Treasury yield above 5%, lifted the 10-year to a 15-month high and sent the two-year to its highest since March 2025.
Economists and strategists say the market may be overreacting to higher oil prices and headline inflation, with thin trading in longer-dated contracts making the hike signal look lower-conviction.
Those contracts show odds rising to about 73% by July next year, but volume drops sharply further out, underscoring doubts that futures are reliably capturing the Fed's likely path.
The debate adds pressure on new Fed Chair Kevin Warsh, whose inflation-hawk reputation is being tested as sticky prices clash with President Donald Trump's preference for lower rates.

Markets are betting big on a Fed rate hike. Why do so many experts think they are wrong?

Can new Fed Chair Kevin Warsh tame oil-fueled inflation without triggering a recession?

A key oil chokepoint is closed. Is a Fed rate hike now inevitable to fight the resulting inflation?