Egg cartons are displayed in a grocery store with a warning that the limits will be placed on shopping because the bird flu still affects the egg industry on February 10, 2025 in New York.
Spencer Platt Getty images
According to updated market prices, a reduction in the interest rates of the federal reserve will remain at least until at least September, if this year, after a disturbing inflation report.
Futures contract markets moved from waiting to the June cut and maybe another before the end of the year to any movement until the fall, with a minimal chance of continuing before the end of 2025.
“Fed will see January hot inflation as confirmation that price pressure is still bubble under the economy surface,” wrote Bill Adams, chief economist Comerica, in a commentary that repeated others around Wall Street. “This will strengthen the FED propensity to at least slow, and probably even reduction in the final rates in 2025”
Reduced optimism to facilitate the Fed after January Consumer price index report showed 0.5% monthly increase, increasing the annual inflation rate to 3%, a touch higher than in December, and only slightly lower than 3.1% of reading in January 2024, excluding food and energy, the message was even worse, and the rate 3 , 3% showed that the basic inflation, on which the Fed tends to rely on more, also rising and maintaining the central bank's goal much above.
Fed chair Jerome PowellIn the performance on Wednesday before the House Financial Service Committee, he insisted that the central bank would make “great progress” in the field of inflation from the peak of the cycle “, but we are not there yet. So we want politics to be restrictive. “
The chairman of the US Federal Reserve Jerome Powell testifies before the interrogation of the Committee for Financial Services regarding the “half -year monetary policy report to Congress” at Capitol Hill in Washington, USA, February 12, 2025.
Nathan Howard Reuters
Since the FED is 2% inflation, and the report has not shown recent progress, it was also darkened that the Central Bank would consider that further alleviating the policy would be respectively after it has pulled a full percentage point from the short -term loan rate in 2024.
Fed Funds Futures Trading indicated only a 2.5% chance of marching; Only 13.2% in May, up to 22.8% in June, then 41.2% in July and finally to 55.9% in September, in accordance with Fedwatch of CME groups Meter from late Wednesday morning. However, this would be likely that it still exists in the air until October, when the valuation borea contracts mean a probability of 62.1%.
The chances of a second cut by the end of 2025 amounted to only 31.3%, with the prices did not indicate the next reduction by the end of 2026. The FED fund rate is currently focused in the range between 4.25%-4.5%.
Issues raised in the CPI report do not take place in insulation. Decision -makers also observe the policy of the White House trading with the president Donald Trump pushing aggressive tariffs It can also increase prices and complicate the Fed's will to achieve your goal.
“You can't move away from the fact that this is a hot report, and the feeling that potential tariffs are exposed to the risk of inflation, the market is understandable from the view that the federal reserve will be difficult to justify the cuts of the rates near the future,” said James Knightley, the main international economist In ING.
While the Fed pays attention to CPI and other similar price measure, its preferred inflation indicator is the price of personal consumption prices, which the Economic Analysis Office will publish later in February. Elements from the CPI filter to read PCE, and Citigroup said that he expected Core PCE to fall to 2.6% in January, which is a decrease of 0.2 percentage from December.