Saturday, August 9, 2025

Interest Rates on the Rise? U.S. Market Experts Bet on It

Former Fed Vice Chairman and others advocate rate hikes
Speculation of rate hikes in the options market
Possibility of further hikes within 12 months on the rise

There is a rising speculation that the Federal Reserve, America’s central bank, may raise interest rates, with a likelihood of over 20%. Although figures such as former U.S. Treasury Secretary Lawrence Summers and former Fed vice chairman Richard Clarida, now an advisor at PIMCO, have argued for rate hikes, this is the first time market experts have suggested an increase. Experts are betting on a rate hike as the U.S. economy recovers and inflation remains unchecked.

On March 22nd, the Financial Times (FT) reported that in the options market, the possibility of the Fed raising rates again within the next 12 months has risen to 20%, suggesting a shift in market expectations.

In January, market experts predicted that the Fed would cut rates six to seven times this year, lowering the rate by around 1.75%. However, as U.S. inflation rose in the spring of 2022, the Fed raised rates 11 times until July, increasing them to 5.25-5.5%. With the Consumer Price Index (CPI) exceeding expectations in January and February and likely surpassing forecasts in March, the possibility of resuming rate hikes is seriously considered.

FT reported, “For the third month in a row, higher-than-expected U.S. inflation data has been released, and investors in the options market have begun to take seriously the possibility of a Fed rate hike raised by former U.S. Treasury Secretary Summers.”

Earlier this month, Summers stated, “The Fed’s next move will be a rate hike,” and that “there is a 15% chance they will raise it again this year.” When both the March CPI and the core CPI, excluding energy and food, exceeded expectations, Summers warned that “it would be risky and a big mistake for the Fed to cut rates in June” and that there could be one more hike in this cycle.

Clarida, a former Fed vice chairman and now an advisor at PIMCO, said, “If the data continues to disappoint, the Fed may need to start considering raising rates again.” He predicted that if the core Personal Consumption Expenditures (PCE) price index, excluding energy and food, exceeds 3%, the likelihood of resuming rate hikes increases.

Gregory Peters, Co-Chief Investment Officer (CIO) of PGIM Fixed Income, also said, “I think it’s entirely appropriate to consider raising rates.”

Recently, high-ranking Fed officials have also suggested that there’s no rush to cut rates. John Williams, president of the Federal Reserve Bank of New York, said that looking at the current U.S. economy, there’s no urgency to cut rates, and “if economic indicators point to the need for higher rates to achieve our goals, we should follow.”

Benson Durham, head of asset allocation and global policy at investment bank Piper Sandler, stated, “Our analysis shows a 25% chance of a rate hike in the next 12 months,” and “according to PGIM’s analysis of options data, the probability of a rate hike in the same period is 29%.”

Hot this week

U.S. Hits Chinese Graphite With 93% Tariff—Your Next EV Just Got Pricier

The U.S. imposes a 93.5% tariff on Chinese graphite, risking a $1,000 increase in EV prices as tax credits end and production costs rise.

Crypto Boom: XRP Soars After Congress Passes Stablecoin Bill

The Stablecoin Act has passed Congress, boosting crypto markets, with XRP hitting a new all-time high and regulatory clarity for stablecoins.

Market Panic? Rich Investors Saw a Bargain, Morgan Stanley Says

Morgan Stanley's profits surged as wealthy clients bought stocks during a market downturn, driven by Trump's tariff announcement.

Oil Prices Keep Dropping as Trade Fears Grow

Oil prices fell for the third consecutive day due to rising U.S. gasoline inventories and trade tensions impacting global demand.

Tesla and BYD Battle for Japan’s Electric Car Crown: Who Will Win?

Tesla and BYD aggressively expand in Japan's EV market, aiming to challenge local automakers amidst low EV adoption rates.

Topics

U.S. Hits Chinese Graphite With 93% Tariff—Your Next EV Just Got Pricier

The U.S. imposes a 93.5% tariff on Chinese graphite, risking a $1,000 increase in EV prices as tax credits end and production costs rise.

Crypto Boom: XRP Soars After Congress Passes Stablecoin Bill

The Stablecoin Act has passed Congress, boosting crypto markets, with XRP hitting a new all-time high and regulatory clarity for stablecoins.

Market Panic? Rich Investors Saw a Bargain, Morgan Stanley Says

Morgan Stanley's profits surged as wealthy clients bought stocks during a market downturn, driven by Trump's tariff announcement.

Oil Prices Keep Dropping as Trade Fears Grow

Oil prices fell for the third consecutive day due to rising U.S. gasoline inventories and trade tensions impacting global demand.

Tesla and BYD Battle for Japan’s Electric Car Crown: Who Will Win?

Tesla and BYD aggressively expand in Japan's EV market, aiming to challenge local automakers amidst low EV adoption rates.

Nvidia Stock Surges Past $170 After U.S. Clears China Chip Exports

Nvidia's stock surged over 4% after the Trump administration lifted export restrictions on H20 semiconductors to China.

Army’s New Shaving Rule Could Push Out Thousands of Black Soldiers

The U.S. Army's new shaving policy may disproportionately impact Black soldiers with shaving difficulties, raising concerns over its fairness.

Trump Slams Fed Chair Again, Demands Rates Below 1%

Trump criticizes Fed Chair Powell, insists interest rates should drop below 1%, claiming the economy is strong and inflation is nonexistent.

Related Articles