Fed Rate Hike Odds Hold at 81% as NYMEX Gasoline Surges on Wednesday
CME futures price an 81% probability of a September increase even as ICE Brent crude retreats, with product markets moving sharply in the other direction.
NYMEX RBOB Gasoline front-month surged 5.66% on Wednesday (2026-07-29) to $3.36 a gallon, a move that cuts against the modest relief offered by ICE Brent crude front-month's retreat to $87.33 a barrel. Crude has pulled back from the $100-plus prints recorded during the week of July 21-25, when Middle East violence escalated sharply. But refined product markets are not following.5,4
If the gasoline spike holds, it feeds directly into the next CPI transport component, which has been among the stickier elements of recent U.S. inflation prints. The Federal Open Market Committee wraps up its two-day meeting on Wednesday (2026-07-29), with CME FedWatch data showing futures markets assigning an 81% probability to a rate increase at the September meeting, according to IBTimes. Policymakers now face an energy-driven inflation shock that has proved harder to dismiss than some officials initially suggested.4,5
The inflation data generated during oil's run above $100 has not reversed. U.S. CPI rose 0.5% from April and 4.2% year-on-year in May, the highest annual reading since April 2023 and the first time inflation cleared 4% in three years. Energy prices rose 3.9% in May and 23.5% from a year earlier, accounting for roughly 60% of the total monthly CPI increase, with the Iran-related oil rally feeding through across transportation and utilities, the Bureau of Labor Statistics reported.3
Core CPI, stripping out food and energy, rose only 0.2% in May and 2.9% annually. Food prices added 0.2% and shelter 0.3%. The gap between core and headline gives some FOMC members a basis for arguing external supply is doing the work. Not all of their colleagues agree.3
Kansas City Fed President Jeffrey Schmid warned in late May that the current energy shock cannot simply be dismissed as transitory, given already-elevated baseline inflation. Speaking at a conference in Iceland before the May CPI data was published, Schmid issued a clear rejection of the central bank's 2021 stance on energy price pass-through, according to OilPrice.com.2
Rigzone, citing people familiar with the matter, reported on Saturday (2026-07-25) that the Fed is prepared to raise rates in September if the inflation outlook does not improve. That squares with the CME's 81% probability reading, leaving the September meeting as the de facto decision point unless incoming data shifts sharply.5,4
The OECD's modelling, cited by The Economist in May 2026, suggests a sustained $10 rise in oil eventually adds 0.3 to 0.4 percentage points to overall inflation. With oil having breached $100, OECD average inflation could exceed 4%; at $140 a barrel, the modelled range rises to 5-6%. Historical patterns suggested monthly global inflation could clear 0.6% by July, equivalent to more than 7% annualised. ICE Brent front-month has since retreated below $90, but the inflation pass-through lag means the price history of the past several weeks still shapes upcoming CPI prints.1
Gold complicated the rate-hike narrative on Friday (2026-07-17), when it fell as Brent broke $100 and September hike odds surged, IBTimes reported. By Wednesday (2026-07-29), COMEX Gold front-month had recovered to $4,032 per troy ounce, up 0.18% on the session. Analysts cited by IBTimes suggested the recovery reflects investor demand for geopolitical insurance even as hawkish Fed pricing persists.4
U.S. goods inflation also moved quickly. Economist analysis from May 2026 showed year-on-year goods inflation had jumped from under 1% to nearly 3.5% within a compressed timeframe, broadening price pressures beyond energy. European governments spent more than 2.5% of GDP in 2022 and 2023 to shield consumers and businesses from the previous energy shock; no equivalent fiscal buffer is on the table in the current U.S. cycle.1
The 81% September hike probability rests partly on crude that has already pulled back from its peak. Yet NYMEX RBOB's 5.66% surge on Wednesday (2026-07-29) suggests product markets are not pricing in a swift resolution to Middle East supply concerns. If ICE Brent front-month moves back toward $100, the inflation path shifts upward again and the Fed's room to manoeuvre narrows further — the September meeting hinges on whether crude stays down or the product market's signal proves the more accurate read.4,5