- Markets think the odds the Fed hits pause on further rate hikes this week are close to 100%.
- Fed fund futures pricing showed investors think the odds of a pause rose after the release of May’s CPI.
- Consumer inflation cooled again last month, coming in at 4% on an annual basis.
Markets think that the Federal Reserve is about to hold off on rate hikes, hitting pause this week after 10 consecutive increases to its benchmark rate since last March.
According to the CME FedWatch Tool, fed fund futures pricing implies markets think the odds are 95% that the central bank holds off on another rate hike at the conclusion of its policy meeting on Wednesday.
That figure jumped from around 75% before Tuesday morning’s release of the Consumer Price Index showed inflation cooled to 4% year over year in May. That’s the lowest rate of inflation in two years, and will be a big factor in whatever the Fed decides to do this week.
If the central bank leaves benchmark rates unchanged, they will remain in a range of 5%-5.25%.
“Tuesday’s Consumer Price Index suggests that inflation has been defeated. Most of the inflation we are seeing is coming from housing, but it takes time for home price declines to show up in the CPI data, so today’s 4% inflation rate is actually much closer to the 2% Federal Reserve target,” David Bahnsen, CEO of wealth manager The Bahnsen Group, said in an email following the report.
Stocks rose broadly on the news of cooler inflation, with the S&P 500 continuing to rise after closing Monday at its highest level since April of last year.
May’s CPI report showed prices rose 0.1% month over month, less than the 0.2% gain projected by economists. Food prices rose 0.2% after two consecutive months of registering no increase.
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- Markets think the odds the Fed hits pause on further rate hikes this week are close to 100%.
- Fed fund futures pricing showed investors think the odds of a pause rose after the release of May’s CPI.
- Consumer inflation cooled again last month, coming in at 4% on an annual basis.
Markets think that the Federal Reserve is about to hold off on rate hikes, hitting pause this week after 10 consecutive increases to its benchmark rate since last March.
According to the CME FedWatch Tool, fed fund futures pricing implies markets think the odds are 95% that the central bank holds off on another rate hike at the conclusion of its policy meeting on Wednesday.
That figure jumped from around 75% before Tuesday morning’s release of the Consumer Price Index showed inflation cooled to 4% year over year in May. That’s the lowest rate of inflation in two years, and will be a big factor in whatever the Fed decides to do this week.
If the central bank leaves benchmark rates unchanged, they will remain in a range of 5%-5.25%.
“Tuesday’s Consumer Price Index suggests that inflation has been defeated. Most of the inflation we are seeing is coming from housing, but it takes time for home price declines to show up in the CPI data, so today’s 4% inflation rate is actually much closer to the 2% Federal Reserve target,” David Bahnsen, CEO of wealth manager The Bahnsen Group, said in an email following the report.
Stocks rose broadly on the news of cooler inflation, with the S&P 500 continuing to rise after closing Monday at its highest level since April of last year.
May’s CPI report showed prices rose 0.1% month over month, less than the 0.2% gain projected by economists. Food prices rose 0.2% after two consecutive months of registering no increase.
