What caused traders to increase bets on a Federal Reserve rate hike by September?

Traders boosted wagers for a Fed rate hike after a spike in oil prices revived inflation concerns and new Fed Chair Kevin Warsh delivered a hawkish message at his first meeting, stating the central bank 'won’t tolerate high inflation,' which pushed yields higher and increased swap-implied hikes from 8 basis points earlier in the week to a fully priced 25-basis-point increase by September.

How did Kevin Warsh’s first Fed appearance influence market expectations?

Kevin Warsh’s first Fed appearance rattled markets because investors hadn’t expected him to strike such a hawkish tone; he declared the Fed ‘won’t tolerate high inflation,’ referencing that the central bank has missed its inflation target for five years running—this rhetoric directly fueled expectations of tighter policy and contributed to the jump in implied rate hikes from 23 to 25 basis points over one day.