A hotter-than-expected January inflation report triggered sharp market reactions in early trading Wednesday, as investors dialed back their expectations for Federal Reserve rate cuts.
Traders pushed the first anticipated Fed rate cut to December 2025, while the second cut is now priced in no earlier than September 2026, as per CME FedWatch.
A single rate cut in 2025 is also emerging as the most likely scenario according to betting odds as tracked by the CFTC-regulated Kalshi platform.
A Hot Inflation Reading Derails Fed Rate Cut Hopes
The Consumer Price Index (CPI) rose 3.0% year-over-year, slightly above both the prior reading and expectations of 2.9%. This marks the fourth consecutive increase in annual inflation.
The monthly reading was even more alarming as CPI surged 0.5%, the largest increase since August 2023, and the third straight month of accelerating price pressures.
Among major CPI components, fuel oil saw the biggest jump, rising 6.2% month-over-month.
“The index for meats, poultry, fish, and eggs rose 1.9 percent over the month, as the index for eggs increased 15.2 percent. This was the largest increase in …
Full story available on Benzinga.com