【Has the Market Already Written the Rate Hike Script? Will the Fed Play Along?】

While the Federal Reserve maintains a rate-cutting baseline officially, market expectations have clearly shifted, even beginning to bet on the possibility of future rate hikes. Three major factors driving this rising risk include: inflation persisting above the 2% target, rising oil prices potentially pushing prices higher, and actual interest rates continuously declining since rate cuts began in 2024, rendering monetary policy no longer distinctly restrictive.

Current inflation remains stubborn, particularly with core services inflation staying elevated, undermining the effectiveness of the Fed's strategy relying on "stable inflation expectations." If inflation proves difficult to bring down, the Fed may have no choice but to suppress economic activity and employment to achieve its targets, meaning the rate hike option is back on the table.

Meanwhile, rising oil prices have limited dampening effects on the economy, and coupled with fiscal stimulus and looser credit conditions, overall demand remains robust, making it difficult to ease inflation pressures. Major global central banks are also broadly signaling a more hawkish stance, driving bond yields higher.

Given all this, why isn't rate hikes the baseline scenario? One reason is that as tariffs and housing pressures fade, inflation will likely resume its downward trajectory. Another reason is the labor market. While the labor market isn't in crisis, it's not healthy either. With annual wage growth below 4%, combined with solid productivity gains, this is entirely compatible with 2% inflation.

Finally, as the Iran conflict persists, the risk of sustained elevated energy prices is growing, which could seriously damage the economy and disrupt financial markets, potentially triggering a recession that ultimately leads to declining inflation. Therefore, before seriously considering rate hikes, the Fed should exercise patience.

(The above views are excerpted from Wall Street Journal columnist Greg Ip and are for reference only and do not constitute investment advice #TradFi首创多倍杠杆 #加密行情震荡