Financial

Fed Rate Cut Expectations Drop On Unexpectedly Strong CPI Data

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Interest rate data from CME Fedwatch, calculation and chart by MishLooking out to December of 2024, the market keeps pricing out rate cuts.On December 26, 2023, the market expected a December Fed Funds rate of 3.82 percent. Yesterday, the expectation was 4.26 percent and today it is 4.49 percent.In less than two months, the market dialed back three quarter-point cuts for December, one of them today.Target Rate Probabilities for May 2024Chart courtesy of CME Fedwatch.Action in May

  • A month ago, the market thought there was no chance the Fed would hold pat through May.
  • A week ago, the odds were 33.4 percent.
  • Yesterday, the odds were 39.3 percent.
  • Today, the market says there is a 62.1 percent chance the Fed did not cut in March or May. There is no April meeting.

    • Another Hotter Than Expected CPIFor the 29th consecutive month rent was up at least 0.4 percent. Shelter, a broader category, rose 0.6 percent. Food rose 0.4 percent.(Click on image to enlarge)CPI data from the BLS, chart by MishFor discussion, please see Hotter Than Expected

  • The CPI was hotter than expected in January, up 0.3 percent vs a Bloomberg consensus expectation of 0.2 percent.
  • All items excluding food and energy rose 0.4 percent vs an expected 0.3 percent.
  • Year-over-year the CPI rose 3.1 percent vs an expected 3.0 percent.
  • Year-over-year the CPI excluding food and energy rose 3.9 percent vs an expected 3.7 percent.

    • Energy declined 0.9 percent for the month, preventing a disastrous headline number.For a detailed look at the data with a special focus on rent, please click on the above link.More By This Author:Another Hotter Than Expected CPI Led By Shelter, Up Another 0.6 PercentThe Fed Is Very Concerned Over Spending And Interest On The National Debt Credit Card And Auto Delinquencies Soar, Especially Age Group 18 To 39

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