Plot twist

Completely off the radar at the start of the year, the scenario of a Fed rate hike in 2026 has now become the front-runner. A spectacular comeback for a script that only 1% of traders considered on January 1st but now commands an absolute majority with 52% of the votes.

This reversal stems mainly from recent inflation data, with the CPI index up 3.8% year-over-year in March driven by soaring oil prices (while core inflation still climbs at 2.8%).

Shaken by geopolitical turbulence around the Strait of Hormuz, the new economic reality currently validates Jerome Powell’s cautious stance throughout 2025, but it could particularly constrain his successor Kevin Warsh.

Eager to cut rates, the future Fed chair may have to settle for keeping them unchanged at best, and at worst, dig in his heels to contain their irresistible rise.

Evidence of this growing concern in trading rooms: the US 10-year yield has returned above 4.50% (highest since January 2025), nearly 50 basis points above the Fed’s current target range (3.5% to 3.75%).

Beyond Nvidia’s results expected Wednesday, the market will pay close attention to Walmart, Home Depot and Target earnings to observe how retailers handle inflation and gauge its impact on the end consumer.