On 25/6, CME Group's futures contract trading data indicated investors reduced their bets on the Federal Reserve (Fed) raising interest rates at its July meeting. This probability now stands at just 30%, a decrease from nearly 40% earlier.

However, the probability of the Fed raising rates in September has risen to 80%. During its meeting last week, the Fed maintained its benchmark interest rate at 3.5-3.75%.

According to data from the US Department of Commerce, the personal consumption expenditures (PCE) index for May increased by 4.1% year-over-year, marking the highest rise since April 2023. The PCE is the Fed's preferred inflation gauge. The agency aims for 2% inflation, a target it has not met for over five years.

Fed Chair Kevin Warsh at a press conference on 17/6/2026 in Washington (US). Photo: AFP

At the first meeting this month, new Fed Chair Kevin Warsh declared that he and other officials would achieve the inflation target. Analysts and investors interpreted this statement as a signal that the Fed would soon raise interest rates.

Last week, major banks like Bank of America (BofA) and Deutsche Bank also anticipated a Fed rate hike in September. This expectation stems from the US economy's continued strength and Warsh's hawkish outlook.

BofA forecasts the Fed will raise rates by an additional 25 basis points (0.25%) in September, October, and December. This represents the most aggressive forecast among major global banks. Deutsche Bank, conversely, expects only two hikes, in September and December, each by a similar amount. Both banks predict the Fed will maintain current interest rates next year.

However, excluding volatile categories such as food and energy, the US core PCE for May increased by only 3.4% year-over-year. Martin Beck, Chief Economist at consulting firm PPHC, pointed out that compared to April, core PCE did not even accelerate.

"The May PCE report shows the fight against inflation is not over, but it's also not a clear sign that underlying price pressures are accelerating again", he stated. Fuel prices, a significant factor in May's sharp PCE increase, have decreased considerably. Therefore, he added, "the Fed can continue to be patient rather than panic."

Global crude oil prices have fallen back to near pre-conflict levels after the US and Iran concluded peace talks in Switzerland earlier this week. A barrel of Brent is currently priced at 74 USD, while US crude oil stands at 71 USD.

Ha Thu (according to Reuters)