The market is starting to think the Federal Reserve's next move is raising interest rates

What: The market is pricing in a **75** basis point interest rate hike by the Federal Reserve in May 2026.
Why: Investors are anticipating a strong labor market and rising inflation, prompting the Fed to act.
Signal: The 2-year Treasury yield has risen to **3.25%**, a key indicator of market expectations.
Target: The Fed's target inflation rate is **2%**, and the market believes they will meet it with a rate hike.
Risk: A premature rate hike could slow down the economy, while a delay may fuel further inflation.