The market has started to price a 50% probability interest rate hike in October, completely wiping out the expectation of a rate cut. At least one rate hike in previous years has come close. The main logic of market pricing 1. Now it doesn't seem like the next FOMC will raise interest rates immediately, but the probability of at least one increase by October or within the year has significantly increased. The implied probability of the market quoted by the media today is roughly in the range of 40% to 60%, with differences mainly due to different deadlines and statements. 2. In recent days, after the Middle East conflict hit oil and gas infrastructure, crude oil surged to around $119 and continued to fluctuate at a high of $100. What the market is concerned about is the resurgence of input inflation, with gasoline, transportation, chemical, and shipping costs spreading downstream. 3. This round of inflation has not been completely suppressed, so the impact of oil prices is particularly easy to rewrite the path. The US CPI in February was 2.4% year-on-year, PCE in January was 2.8% year-on-year, core PCE was 3.1% year-on-year, and PPI in February was 0.7% month on month and 3.4% year-on-year. That is to say, before the oil price jump, inflation data was already very fragile, and the market's original logic of smoothly cutting interest rates was being falsified. 4. The economy is not weak enough for the Federal Reserve to rescue. The Federal Reserve's statement on March 18th was that the economy is still steadily expanding, the unemployment rate has not changed much, inflation remains high, and there is uncertainty about the impact of the Middle East situation on the US economy. During the same period, SEP raised the median GDP for 2026 from 2.3% to 2.4%, maintained the unemployment rate at 4.4%, but raised both the PCE and core PCE for 2026 to 2.7%; The median federal funds rate remains at 3.4%, corresponding to a benchmark scenario that is more like a one-time rate cut rather than rapid easing. In February, the non farm payroll decreased by 92000 and the unemployment rate was 4.4%, which also indicates that the economy is not bad enough to force the Federal Reserve to immediately turn dovish. So the main line of market pricing is actually very clear: First, remove the expectation of interest rate cuts, then set higher interest rates for a longer period of time, and finally make up for the tail probability of interest rate hikes within the year. Essentially, it is an increase in the risk of trading stagnation, not a re overheating of the trading economy. The increasing probability of interest rate hikes seen now is largely due to insurance and hedging against the scenario of uncontrolled oil prices. If the energy shock eases, the pricing of these interest rate hikes will also fall quickly.