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finance.yahoo.comMAY 256 min read$CMEBullishMed

Another top Fed official resets rate-cut bets

Fed Governor Christopher J. Waller said in May 22 remarks that the Fed’s current “wait-and-see” stance is appropriate, but he can’t rule out rate hikes if inflation risks from the Iran war don’t abate. He cited “inflation is not headed in the right direction” and high oil prices. Markets now price a 43% chance of a 25 bp hike in December, with the FedWatch tool.

AI DeskMay 25, 2026
Source · finance.yahoo.com
AI analysis
Actionability
Med
Sentiment · $CME
Bullish
Timing
High for positioning into the June 16-17 FOMC meeting; Waller’s hawkish reset shifts the expected path immediately.
Market alignment
Hawkish—rate-cut bets are reduced and bond yields are described as rattled by inflation risk.
Why this matters for $CME

FedWatch probabilities reset higher, likely boosting near-term demand for rates-implied hedging and derivatives activity.

Relevance context

CME Group’s FedWatch Tool is cited for pricing a December 25 bp hike probability of 43% after Waller’s remarks.

Price-impact prediction

Near-term supportive for CME as volatility/positioning around Fed expectations increases.

Background

After months of rate-cut expectations, Fed Governor Waller warned that inflation risks from the Iran War could justify future rate hikes.

Why it matters

The key tradable mechanism is repricing of the policy path: FedWatch probabilities rise, yields remain elevated, and the June meeting is expected to hold but with asymmetric risk.

Market relevance

A hawkish Fed signal tied to Iran-war inflation risk resets rate-cut expectations and can drive rates/FX/sector rotation.

Market effects

Sector

Higher-for-longer rates risk compressing duration-sensitive growth/tech multiples while supporting financials and value/credit selectivity.

Regional

Primarily US rates/FX spillover; global bond markets may reprice on the same inflation-risk narrative tied to the Iran War.

Global

Oil/inflation shock framing can propagate to global inflation expectations and sovereign yield curves.

Alternative perspectives

Contrarian view

If oil-driven inflation proves transitory, the market may overreact to hawkish rhetoric and reprice cuts sooner than implied.

Overlooked factors

The article notes labor-market stabilization; if employment weakens faster than inflation, the hawkish stance could be short-lived.

Key entities

  • Fed official
    Christopher J. Waller

    Fed Governor signaling a hawkish shift and stating he can no longer rule out rate hikes if inflation doesn’t abate.

  • Market tool
    CME Group FedWatch Tool

    Instrument used to price the probability of a December 25 bp rate hike after Waller’s remarks.

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