Market participants betting on a Federal Reserve rate increase in December are seeing their thesis validated by fresh data, with core inflation trending sharply higher. The Cleveland Fed’s median CPI annualized monthly change has accelerated to 2.81% for September 2026, up from 2.10% in August. This surge in the core inflation trend provides a fundamental catalyst for the 'Hike 25bps' outcome on the KXFEDDECISION-26DEC contract.
The impact of this data is already being reflected in the pricing of the contract, which currently implies a 71% probability of a 25 basis point hike. The rising core-trend inflation measure serves as a critical check against the Fed's current easing stance, providing fundamental backing for the already-elevated hike probability. This alignment between the accelerating inflation data and the market's pricing suggests the current strike levels on the hike outcome may be underpriced relative to the inflation trajectory.
What would change this read
A subsequent CPI or PCE print showing core inflation decelerating back toward or below 2.0% annualized would directly undercut the rationale for a hike, potentially triggering a sharp re-rating of the contract's probability and price.
