CME FedWatch Tool Signals 43% June Rate Hike After 4.2% CPI Surge
CME•Traders are pricing a 43% probability of a 25-basis-point rate hike at the June 17 Fed meeting and a 32% chance of unchanged rates through December via CME Group’s FedWatch Tool. U.S. consumer prices rose 4.2% year-over-year in May while U.S. crude topped $89.64 per barrel after Iran-U.S. strikes.
1. Inflation and Oil Impact
U.S. consumer inflation increased by 4.2% year-over-year in May, marking the fastest pace since April 2023. Concurrently, geopolitical tensions between Iran and the U.S. propelled U.S. crude oil to $89.64 per barrel (up 1.63%) and Brent to $92.65 (up 1.31%).
2. FedWatch Probability Shifts
Using CME Group’s FedWatch Tool, traders have priced in a 43% chance of a 25-basis-point rate hike at the June 17 Federal Reserve meeting and a 32% probability of no rate change through December. These odds reflect market sentiment that rising energy costs and sustained inflation could prompt further monetary tightening.
3. Implications for CME
Heightened rate uncertainty and oil-driven inflationary pressures are likely to boost trading volumes and open interest in CME’s futures and options products. Increased reliance on the FedWatch Tool may drive subscription growth and higher fee-based revenue for CME Group.
