Rate hike odds have overtaken rate cut odds for the first time in this cycle. Let that land.

The Federal Reserve held its benchmark rate at 3.5%–3.75% on Wednesday, voting 11-1, with Governor Stephen Miran casting the lone dissent in favor of a quarter-point cut. The dot plot still projects one reduction this year. Markets are no longer buying it.

Prediction markets tracked by Fortune show June rate hike odds at roughly 15%, converging with cut odds near 16% — close enough that hikes briefly pulled ahead for the first time. Bond traders, meanwhile, have priced out any cut for all of 2026. “A month ago, no one would have believed this,” said Ryan Detrick of Carson Group.

The Numbers That Moved

Fed officials raised their 2026 headline inflation forecast to 2.7%, up from 2.4% in December, with core PCE also lifted to 2.7%, up from 2.5%. The Iran conflict has sent energy prices surging, and persistent inflation concerns show no signs of easing. Yardeni Research hiked its stagflation-meltdown probability to 35%, up from 20%.

Chair Powell acknowledged the bind plainly: labor market risks call for lower rates, inflation risks call for higher ones. The Fed chose to do nothing — and signaled it may keep choosing nothing for a while.

Powell’s Other Stand

Asked about the Justice Department’s probe into the Fed’s headquarters renovation — widely seen as a pressure tactic to force rate cuts — Powell was blunt. “I have no intention of leaving the board until the investigation is well and truly over, with transparency and finality.”

A federal judge last week quashed two DOJ subpoenas directed at the Fed, calling them part of an improper harassment campaign. The Justice Department has refused to drop the case. Powell, it appears, has refused to care.

Sources