The Fed rate markets witnessed extraordinary reversals that tell the story of inflation concerns overwhelming previous cut expectations. A surge in oil prices tied to the Iran war is pushing inflation higher and could delay the relief many Americans were counting on. The market for rates above 2.75% by January 2027 surged to 85¢ from 24¢ (+61¢), while traders simultaneously crushed expectations for aggressive cuts—the above-3.75% market collapsed from 63¢ to 5¢ (-58¢). Even more telling, the probability of rates staying above the current range jumped across the curve, with rates above 1.50% rising to 90¢ from 33¢ (+57¢). Inflation remains somewhat elevated according to the latest Fed statement, and with inflation running high and inflation expectations at risk of becoming unanchored, Fed officials have been dialing back their enthusiasm for rate cuts. This represents a complete inversion from earlier expectations of meaningful easing, with the market now pricing in a much more hawkish Fed forced to prioritize inflation control over economic support.