A more resilient than expected US economy has probably made a December Fed rate hike inevitable, but it’s already largely priced into markets.
The inflation undershoot is still a problem. Yet the economy has proven more resilient that we had expected. Furthermore, we see few signs that more Federal Open Market Committee (FOMC) members are reassessing their monetary policy outlooks to effect a change in strategy. Market expectations are fairly unanimous as well. For the past few weeks, the futures market has priced in a more than 80% probability of a December rate hike, indicating the Fed is free to act without risking an adverse market reaction.