The market for Federal Reserve interest-rate futures has undergone a sharp repricing, with traders now pricing in a rate hike as early as December.
This marks the first time in the current monetary cycle that the probability of a tightening move has entered the consensus view, signaling a fundamental shift in how investors are interpreting the central bank's policy path.
The reversal comes on the back of a series of unexpectedly high inflation readings that have eroded confidence in a near-term return to rate cuts.
Rather than fading, the inflation data has forced a reassessment of the Fed's terminal rate and the duration of restrictive policy.
The shift in Fed funds futures reflects a growing belief that the central bank may need to keep rates higher for longer, or even tighten further, to ensure price stability.
This development stands in stark contrast to the easing bias that has dominated markets for much of the cycle.