While President Donald Trump made his pick for chair of the Federal Reserve with interest rate cuts in mind, his appointee may preside over the first rate hikes since 2023. 

That’s according to traders on prediction market platform Kalshi, where there’s a rising likelihood the Fed will move to increase rates in the next year. 

Traders place 64% odds on the next interest rate hike coming by July 2027. They also think there’s a 43% chance tighter policy happens as soon as this year. 

Odds of a rate hike have jumped in the last 24 hours in reaction to ballooning yields on U.S. Treasurys, concern that inflation will continue to march higher and as oil prices show no signs of materially falling in the midst of the unresolved U.S.-Iran war. Traders previously assigned just 50-50 odds that a rate hike would come in the first half of 2027. 

The move in odds comes as the next Fed chair, Kevin Warsh, is set to be sworn in on Friday, replacing Jerome Powell. 

Chances of rate cuts have been falling for some time despite Trump nominating Warsh in late January and attacking Powell for not cutting rates quickly. A stronger-than-expected labor market and rising inflation has dampened economists’outlooks for rate cuts, and several members of the Federal Open Market Committee at its last meeting made clear they weren’t interested in signaling any future cuts. 

But rising U.S. Treasury yields have made investors re-assess the outlook. The 30-year U.S. Treasury bond yield on Tuesday climbed to its highest level since 2007. 

Ed Yardeni, the head of Yardeni Research, said on Monday that the bond market might have more power over monetary policy than soon-to-be Chair Warsh. 

“Who’s actually in the monetary-policy driver’s seat? We’d argue that it’s the Bond Vigilantes,” Yardeni wrote. 

But Wolfe Research chief investment strategist Chris Senyek in a Tuesday note said the moves in the bond markets might force a resolution to the war in the Middle East, potentially easing inflation pressures. 

“We believe the U.S. Treasury market has been signaling persistent inflation and this week was the final straw,” he said. “Our sense is that there is potential for bond vigilantes to push yields higher in [an] attempt to push the Trump Administration to come to a quick resolution on Iran.”

Traders on Polymarket assign 35% odds that there is a rate hike in 2026. 

Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.