Fed fund futures showed a slightly heightened risk of a rate hike in 2008 by the Federal Reserve, following a higher-than-expected CPI print for June on Wednesday.

The seasonally adjusted CPI ticked up 0.3% (0.323%) in June, contributing to a 2.4% year-over-year change, and total inflation rose 1.1% (1.056%) in the month and 5.0% on the year. The consensus was looking for a 0.2% gain in the core and a 0.7% rise in total inflation.

Markets were subsequently forecasting a 44% chance that the Federal Open Market Committee (FOMC) would hold rates at 2.00% at the Dec. 16 meeting. On Tuesday, markets had priced in a 49.8% chance that same scenario would unfold. Conversely, Wednesday's 55.59% implied probability of at least a 25bp hike was up from the previous day's 50.2%.

Galileo Global Advisors chairman and CEO Georges Ugeux said in an interview that a hike by the end of the year was a definite possibility.

"I don't think we have the evidence yet from inflationary pressure that will make it worse, and the U.S. is probably late in that situation," he said. "But what I think we all know is that this is the biggest prices climb since 2005 and, therefore, we realize that whatever the government says'inflation is at our door and it will limit the ability of the Federal Reserve to use interest rates for other purposes than trying to fight inflation."

"So it announces an inevitable increase in interest rates in a reasonably short time, although it's very unusual for the Federal Reserve to raise interest rates during an election year."

A hold on interest rates at the upcoming Aug. 5 meeting was still overwhelmingly priced in at 90.8%, 2% less than where that figure stood on Tuesday.

Also on Wednesday, the minutes of the FOMC's June 24-25 meeting show that FOMC board members agreed upside risks to inflation had increased and generally agreed downside risks to growth had diminished. Most members thought the current 2.00% target rate was appropriate but that risks to inflation may initiate a reassessment.

In contrast to Ugeux, TD Securities senior economics strategist Charmaine Buskas, interpreting the minutes, said a change to rates was unlikely.

"These minutes are useful only insofar as they reveal the schism within the committee prior to the recent ructions in the credit market," she wrote in an email to clients. "With credit conditions once again taking a turn for the worse, there is scope that the Fed will now push back the firming in policy that they mulled at the June 24-25 meeting."

"We expect that a rate hike is off the table for 2008 and will not be seriously considered until well into 2009. There are simply too many wrinkles to iron out before the economy becomes strong enough to withstand higher rates."

All data taken at 3:07 p.m. EDT.

By Ryan Szporer with contributions from Patrick McGee and edited by Sarah Sussman