Episode summary
Probability of more hikes should be higher, says FedWatch's Ben Emons
CNBC Fast Money
· · 6 min · Guests: Ben Emons
Summary
Ben Emons argued that the market is underpricing the chance of another Fed hike, saying recent Fed speakers and inflation data imply a much higher probability than the roughly 17% pricing for October. He said the meeting is still “live,” that the Fed has probably not finished tightening, and that there could be “1 or 2 more hikes” if inflation pressures keep building.
He focused on the inflation mix in the CPI and PPI reports, especially the role of energy. Emons said the Fed cannot directly control energy prices, but more hikes could strengthen the dollar and help pull energy lower. He also warned that pipeline inflation is starting to show up in the producer data and could spill into consumer prices later.
On timing, Emons said the midterm elections should not be a deciding factor for the Fed, which is instead waiting for more real-time data between now and December. He also pushed back on the idea that the economy is already in stagflation, saying the better description is a possible slowdown with inflation still elevated, especially if AI and cloud-related spending cools.
Key takeaways
- Ben Emons said the market’s 17% October hike probability is too low and that the Fed may still need 1 or 2 more hikes.
- Emons argued energy-driven inflation in CPI and PPI leaves the Fed with limited direct tools beyond tighter policy and a stronger dollar.
- He said the midterms should not determine Fed policy; the key input is data between October and December.
- Emons said pipeline inflation is building and could later reappear in consumer prices.
- He rejected a full stagflation call for now, but warned the economy could slow while inflation remains sticky.
Notable quotes
“I THINK THIS PROBABILITY IS TOO LOW THAT THIS THIS MEETING IS FAR MORE LIVE THAN MARKETS OF MAYBE WILLING TO TRADE IT”
“I THINK ENERGY PRICES GO DOWN WHEN THE DOLLAR PARTICULARLY GETS STRONGER”
“I THINK THAT THE MIDTERMS ARE NOT A CONSIDERATION FOR THIS FED TO MAKE A MOVE YES OR NO”
“SO I THINK THAT'S ALSO A REASON WHY PEOPLE ARE HESITANT TO MAKE A MOVE HERE NOW AND WAIT TILL THE MIDTERMS ARE OVER”
How the episode opens
Hike later this month, dropping overnight after fed chair kevin warsh gave no clues on the central bank's next decision, markets are currently pricing in a 17% chance the fed raising rates. For more, let's bring in ben emmons, founder and chief investment officer at fedwatch advisors. Ben, great to have you with us. Do you agree with the market's assessment that it is almost a foregone conclusion that there will be no move in october?
It's interesting to see this probability because if you actually look at the fed speak and you look at the ppi cpi data, then it implies actually a much higher probability. And this tone coming out of fed from various of members that it is a live meeting and they are deliberating the next move. I think what we did overnight was just not saying anything.
It actually signaled in itself. Right. He doesn't want to commit, obviously, but I think he did highlight that there's a synchronized tightening happening globally.
We all deal with the same problem. So I think this probability is too low that this this meeting is far more live than markets of maybe willing to trade it. Yet we see the volatility play out today through names like core.
We've really because I think this dissipation. The fed has to go further from here. I think 1 or 2 more hikes.
So I think the probability is too low. I don't think it should be higher.
So ben when you look at the cpi and the ppi cpi 50% of that move was energy. 25% of that move was shelter. When you look at the ppi, basically on the good side, 80% of that move was energy and 25 or 30% in the services move was energy.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed rate hikes
- probability of more hikes
- fedwatch advisors
- market reaction
Watch the episode
Watch “Probability of more hikes should be higher, says FedWatch's Ben Emons” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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