Traders Price 51% Odds of Fed Hike by January 2027 After 3.8% April CPI
Updated
Updated · Benzinga · May 12
Traders Price 51% Odds of Fed Hike by January 2027 After 3.8% April CPI
10 articles · Updated · Benzinga · May 12
Fed funds futures swung sharply hawkish after April CPI, with CME FedWatch showing a 51% chance of rates rising to 3.75%-4.00% by Jan. 27, 2027, and 2026 cut odds effectively erased.
April headline CPI rose 3.8% year over year, above the 3.7% consensus, while core inflation re-accelerated to 2.8% and core services excluding shelter jumped 0.5% month over month.
Energy helped drive the surprise—up 3.8% on the month and 17.9% on the year after the Strait of Hormuz shock—but economists flagged services as the bigger problem, with airfares up 2.8% monthly and 20.7% annually.
Bank of America said the Fed is "running out of excuses," tracking April core PCE at 0.30% monthly and 3.3% yearly and warning inflation may stay too high for cuts until the second half of 2027.
That backdrop complicates Donald Trump's choice of Kevin Warsh, who was favored as a more dovish successor to Jerome Powell, even as some forecasters still expect the inflation burst to fade later this year.
Why do markets and consumers expect high inflation while Wall Street economists predict a rapid cooldown?
Beyond gas prices, what looming supply chain crises in food and tech will impact American households next?
Can we trust inflation predictions from markets that are themselves facing accusations of illegal activity?
Oil Above $100: How the 2026 Middle East Crisis Is Driving Global Inflation and Accelerating the Energy Transition
Overview
In May 2026, the global economy faces a sharp rise in inflation as oil prices surge above $100 per barrel. This is mainly driven by escalating geopolitical tensions in the Middle East, especially Iran’s demands and the risk of disruption at the vital Strait of Hormuz. The threat to this key oil chokepoint has profound effects on oil market stability, causing higher energy prices to spread across economies. As a result, both consumer and producer prices are rising, particularly in countries that depend heavily on Middle Eastern oil, fueling a new wave of inflation worldwide.