Probability of more hikes should be higher, says FedWatch's Ben Emons

The Federal Reserve faces a complex decision regarding interest rate hikes as inflationary pressures build despite market expectations of a pause. Ben Emons, Founder of FedWatch Advisors, argues that the probability of an October rate move is higher than markets suggest, citing recent PPI and CPI data that reveal significant "pipeline inflation." While energy costs drive much of the current price volatility, the Fed may need to strengthen the dollar through further tightening to curb these effects. The discussion highlights a shift toward prioritizing real-time economic data over lagging indicators, with the upcoming midterm elections potentially influencing the timing of a December hike. Furthermore, the emergence of "stallflation"—a scenario where the economy slows due to a cooling AI build-out while inflation remains elevated—presents a growing risk to the economic outlook, particularly if data center expansion stops supporting the service sector's employment figures.