Strong economic news and hawkish comments by Barr have pushed up the Fed Futures projected rate path. The futures market is now pricing a 71% chance of a hike in October and a 93% chance of at least one hike and 55% chance of two hikes by year end. The whole curve has shifted up. The futures implied odds of 4 or more hikes over the next year is now at 53%, up 13 percentage points since yesterday. Going into the inflation reports two weeks ago the market was forecasting the rate cycle would top out at 3 hikes. Now the most likely forecast from futures is 5 hikes (including last week) and the odds of 6 or more hikes in the cycle is 22%. This is a huge deviation from the FOMC's SEP released just a week ago. We did receive stronger economic data since then, but risk aversion is very likely driving a material amount of the increase in future break-even rates. The embedded tweet below explains why the market implied rates overstate true odds of a hike in cycles such as these...