The bond market is flipping out about it. Here’s why, and what to expect from here

“Inflation is running above our 2 percent target. So the Fed's predominant focus right now should be on prices.” That’s one of several quotes from Federal Reserve Chair Kevin Warsh’s Aug. 28 speech at the Jackson Hole Economic Symposium that have shifted markets toward thinking we’re getting an interest rate hike at the Fed’s next meeting on Sept. 16.

The Chicago Mercantile Exchange’s FedWatch tool, which uses futures market data to forecast interest rate changes, currently gives more than 50-50 odds that the Fed will raise rates by 0.25 percentage points in a couple of weeks in an effort to tackle stubborn inflation. 

It’s a pretty dramatic reversal from where we were earlier this year, when we were expecting the Fed to cut rates. And that reversal has suddenly made the most boring part of your portfolio — bonds — worth paying attention to.