CME Group FedWatch's December hike probability increased to 56.8%

CME Group FedWatch tool, which calculates unconditional probabilities of Federal Open Market Committee (FOMC) meeting outcomes to generate a binary probability tree, today shows that the markets are pricing a 56.8% probability of a 25 bps rate hike in December.

After today's data from the U.S. showed that the Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1% percent and 1.7% in July on a monthly and yearly basis respectively, the odds of a December rate hike advanced 56.8% from 53.2%. Although today's data failed to meet the market projections, investors assessed them as good enough for another rate hike before the year ends.

Commenting on today's data "we believe the Fed will focus on the balance sheet in September, foregoing another rate hike until December. The inflation outlook will not change drastically anytime soon," James Bohnaker, an economist at IHS Markit in Lexington, Massachusetts, told Reuters.

• US: CPI for all urban consumers rose 0.1% in July on a seasonally adjusted basis
• US: Real average hourly earnings for all employees increased 0.2% from June to July
• Fed's Kashkari: Weak CPI inflation data another reason to hold off rate hikes
• Fed's Kaplan: Healthy to begin shedding U.S. bond holdings