Fed Rate Hike Odds for December Surge After May Payrolls Smash Forecasts

The probability of a Federal Reserve interest rate increase by December jumped to 65% on June 5, 2026, after a much stronger-than-expected May jobs report reshaped market expectations. The odds stood at just 48% before the data release, according to LSEG estimates. U.S. nonfarm payrolls surged by 172,000 in May, nearly double the 85,000 forecast by economists in a Reuters poll, and followed an upwardly revised 179,000 gain in April. The blowout number prompted rate futures to price in a higher likelihood that the Fed will lift rates from the current 3.50%-3.75% range later this year. For the upcoming June policy meeting, the market continues to expect the central bank to hold rates steady.