Hope for more reduction rates of nourished rates darkens while Powell records hot CPI means “we are not there yet”
Cardboard eggs are exposed to a warning store that restrictions will be put on purchase because the flu’s bird still affects the egg industry on February 10. 2025 in New York.
Spencer Platt | Getty Images
The decrease in the federal reserve interest rates will not come at least September, if on Wednesday, after a worrying inflation report, according to updated market prices.
The future markets have moved from the expectations of cutting in June, and perhaps the other before the end of the year, on the moves until the fall, with a minimal chance of monitoring before the end of 2025.
“In January, the Fed will see a hot inflation print as a confirmation that the pressures of prices are still bubble below the surface of the economy,” Bill Adams wrote in the commentary, the main economist of Commerika who echoed with others around Wall Street. “This will strengthen the fed tendency on at least slowly and may even reduce the final rate in 2025.”
Reduced optimism to relieve Fed came after January Consumer Price Index Report He showed 0.5% a month’s gain, pushing the annual inflation rate at 3%, a touch higher than December and only slightly lower than 3.1% of reading in January 2024. With the exception of food and energy, the news was even worse, with a 3.3% rate, this showed the basic inflation, to which the Fed tends to rely on more, also increased and kept significantly above the goal of the central bank.
A nourished chair Jerome PowellIn a performance on Wednesday before the House Financial Services Committee, he insisted that the FED made a “big progress” on inflation from its top of the cycle, but we are still not there. So, so far we want to be a restrictive policy. “
Since the FED target for 2% inflation and the report has not shown recent progress, it is also tightened that the central bank will alleviate further policy as needed after throwing a full percentage point from its reference short -term borrowing rates in 2024.
Fed Funds Futures Trading pointed to only a 2.5% chance of reducing March; only 13.2% in May, up to 22.8% in June, then 41.2% in July and finally up to 55.9% in September, according to Fedwatch Group CME Group Late Wednesday morning meter. However, this would leave the likelihood still in the air by October, when futures contracts prices imply 62.1% probability.
The prospects for the second decrease until the end of 2025 were only 31.3%, and prices did not indicate another reduction by the end of 2026. The FED Fund rate is currently targeting between 4.25%-4.5%.
The questions asked in the CPI report do not happen isolated. Politics donors also look at the White House trade policy, with President Donald Trump pushing aggressive tariffs This could also increase the prices and complicate the Fed’s desire to reach its goal.
“You cannot move away from the fact that this is a hot report to which the feeling that potential tariffs risk the risk of inflation, the market is understandable according to the attitude for which federal reserves will be challenging to justify the reduction of a rate near the future,” said James Knightley, the chief international economist In Ing -u.
While Fed pays attention to CPI and other similar prices measures, its preferred inflation meter is an index of personal consumption expenditure, which will publish a bureau for economic analysis later in February. Elements from the CPI filter to Reading PCE, and Citigroup said he expects Core PCE to drop to 2.6% for January, which is a 0.2 percentage point in December.
