FedWatch moved hard after the latest data. Prediction-market smart money was already there. DSCVR Agent Skills compared smart wallets on @Polymarket /@Kalshi with @CMEGroup FedWatch and found the same broad view - no cuts, hikes still on the table - but a pretty important timing difference. Smart money looks more comfortable with a September hold and a hike later. The interesting signal isn't just where both markets agree. It's where one gets there first. Subscribe:

Odds of a hike now sit at 92%. Almost a done deal based on CME FedWatch. Futures have started to price a base case of four 25 bp hikes by June 2027. Yet opinion across CT and FinTwit remain mixed. With core CPI slowing down to levels not seen since March 2021 and headline CPI driven by oil, many argue the Fed has no need to raise rates. The other school of thought is that, with long-term yields rising, a hike is needed to protect Fed credibility and rein in yields. Although the actual efficacy of it is debatable. This is one of the most closely watched FOMC meetings this year. If the Fed hikes, 25 bp is not a large move from the current 3.50–3.75% range. What matters is the expected path from here. The Fed’s stance on current conditions, whether more hikes follow, and by how much. Those are factors more important than the immediate decision. Assets re-rate on deviations from what is priced, so a surprise on the future path is what induces volatility.

Markets are pricing roughly a 90% chance of a Fed rate hike tomorrow. CME FedWatch: 93% Polymarket: 88% Since 2023, Polymarket’s most likely Fed outcome roughly two days before each decision has been right every time in the historical sample.

Two markets are pricing the same Fed meeting and they disagree. CME FedWatch has a 25bp increase at 51.9%. Our book has it at 41.6%, with no change ahead at 57%. Ten points apart on the September 16 FOMC. Neither side is pricing a cut. If you think the rate traders are right, that side is on sale.

🌡️ U.S. inflation hit a two year high in May Headline CPI rose to 4.2% YoY, while core CPI remained at 2.9%. FedWatch shows a somewhat close call ahead: markets imply 66% odds of a hold and 34% odds of a 25 bp hike at the next Fed meeting.

A swell of unfriendly factors for inflation likely will push the Federal Reserve to an interest rate hike next week and there’s possibly another before the end of the year, judging by market pricing Thursday. Traders pushed chances for a rate increase to 70% in morning action, following a report showing increasing wholesale prices in August and a coincidental jump in U.S. crude oil prices past $100 a barrel, according to the CME Group’s FedWatch gauge. Read more:

ISM MANUFACTURING PMI 54.6 IN AUGUST, MISSES CONSENSUS - Manufacturing PMI: 54.6 vs 55.2 est, miss, from 55.6 in July - Prices paid: 71.1 vs 70.5 est, above consensus, unchanged from July - Employment: 51.2 vs 53.0 est, miss, from 52.8 - New orders: 53.7, from 56.7 - Supplier deliveries: 59.3, from 58.9, with readings above 50 indicating slower deliveries Growth slowing, input prices stuck. July's 55.6 was the highest reading since May 2022. Markets are pricing a roughly 70% chance of a 25bp hike at the September 15-16 FOMC meeting, per CME FedWatch.