Fed Rate Hike Odds Drop, Stocks Rally

14.08.2026 · By Bernal Fintech Markets Desk

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Fed rate hike odds have dropped significantly, with the CME FedWatch tool now showing a nearly 70% chance of no rate change in September, up from 56% a week ago. This shift has boosted equities, with SNDK (Sandisk Corporation) rising 13.7% to $1,528.11, marking a notable move in the technology sector. The shift in expectations comes amid easing inflation data, including a benign Producer Price Index report, which has supported a more patient stance from the Federal Reserve.

The S&P 500 reached new highs as inflation concerns waned, reducing the likelihood of further rate hikes. This has led to a more optimistic outlook for markets, with investors shifting their focus from rate hikes to potential economic growth. The shift in sentiment has also been bolstered by geopolitical tensions in the Strait of Hormuz, which have created uncertainty but have not yet led to a significant market correction.

Market Context and Fed Policy

The Federal Reserve has been under pressure to balance inflation control with economic growth. Recent data on consumer and producer prices have suggested that inflation is moderating, which has led to a reassessment of the need for rate hikes. The CME FedWatch tool now indicates a nearly 70% chance of no rate change in September, a significant shift from the previous week’s 56% probability. This change has been driven by a combination of factors, including the Producer Price Index data, which showed a more benign trend than previously expected.

While the Fed has been cautious in its approach, the possibility of a rate hike in October remains, albeit with a lower probability than previously thought. The market is now more focused on the potential for a pause in rate hikes, which has led to a rally in equities. This shift in sentiment has also been reflected in the performance of ETFs, which have seen increased inflows as investors bet on a more accommodative monetary policy.

What it means for markets

The drop in Fed rate hike odds has led to a more optimistic outlook for equities, with SNDK and other technology stocks benefiting from the shift in sentiment. However, the lingering uncertainty surrounding geopolitical tensions in the Strait of Hormuz serves as a potential headwind for both equities and crude oil. Investors should remain cautious as the market continues to navigate these uncertainties.