CME FedWatch data shows the probability of a quarter-point rate hike at the Federal Open Market Committee's Sept. 16 meeting has risen to 85.6%. This marks a significant shift from Aug. 11, when the odds were 48.4%.

The surge is driven by recent inflation data, with the Bureau of Labor Statistics reporting consumer prices rose 3.4% year-over-year in August, and core inflation increasing 0.3% month-over-month. The Producer Price Index also came in above expectations yesterday. Elevated energy prices are further complicating the inflation outlook. In response, Treasury yields have jumped, with the 10-year yield approaching 5%.