Rate Hikes? 😳

Market Musings 2/18/2026

Quick thoughts on the markets and major portfolio news. Not on Ursa yet? Download Ursa from the App Store!

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Are rate hikes back on the table?

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Investors were betting on #RateCuts, but the Fed isn’t ruling out hikes.

Wednesday’s rally had some cold water thrown on it after the Fed meeting minutes were released. The notes largely confirmed what markets already believed that policymakers are planning to pause #RateCuts for awhile.

However, buried in the details was something investors weren’t expecting. A contingent of Fed officials said they would be open to rate hikes if #Inflation progress stalls. That wasn’t exactly on anyone’s bingo card…

Markets had been pricing in at least two #RateCuts this year—not renewed discussion of policy tightening.

So, what’s the deal?

#Inflation moderated in Q4, but it ticked back up in December and January. Near-term price pressures remain a question mark.

Meanwhile, producer #Inflation is still running hot－despite companies appear to be absorbing #Tariffs for now. That may not be sustainable… if those costs eventually get passed through, consumer #Inflation could reaccelerate.

Remember, it was weakening #LaborMarkets that gave the Fed confidence for #RateCuts late last year. If #Inflation proves sticky, weak jobs alone may not be enough to justify further #RateCuts.

Markets were comfortable with a “wait and see” stance for #RateCuts. They’re far less comfortable with even the possibility of rate hikes.

So, what’s next?

#Inflation data now becomes even more important. We’ll get December PCE on Friday — though that’s more backward-looking.

More impactful will likely be the January PPI next Friday which could signal whether retail pricing pressures continue to build.

For now, the message is clear: unlike markets, the Fed isn’t ready to declare victory on #Inflation yet.