The Fed's rate hike cycle is far from over: another hike in December, and the market is already pricing in an 83% chance! Last night's FOMC minutes are even more alarming than the September rate hike itself. In September, the Fed had just raised rates back to 3.75%-4.00%. The market briefly bet that this hike might be the last one, but the minutes explicitly stated: Most officials believe another rate hike before the end of the year is likely appropriate. Some officials even think the current rate level is far from being truly restrictive. Why is the Fed still daring to hike? Because the economy is still growing, consumer spending is resilient, AI-related capital expenditures are booming, the labor market is near full employment, but inflation just won’t come down. Almost all participants believe inflation risks remain tilted to the upside. Staff even revised inflation forecasts for 2026–2028 upward, and the 2% inflation target is now expected to be delayed until 2029. So the real trading point now isn’t whether there will be a hike at the end of October. The market is pricing in only about a 19% chance for an October hike, but December is already at about 83%. October 14 CPI and October 15 PPI are the real danger zones for the next round: If inflation exceeds expectations again, it will become increasingly hard for the Fed to avoid another rate hike in December. Just a few days ago, non-farm payrolls came in at only 29,000, and the market started celebrating the end of rate hikes. Now the minutes have poured cold water on that optimism.