Traders Maintain Bets on September Fed Rate Cut Despite June Inflation Rise

Traders are holding steady on their expectations that the Federal Reserve will begin cutting short-term interest rates by September, even after a recent government report showed a higher-than-expected increase in consumer prices last month. The June Consumer Price Index (CPI) rose 2.7% year-over-year, while the core inflation measure climbed 2.9%, reflecting persistent inflationary pressures.

Despite these figures, market sentiment remains focused on a possible rate cut later this year, with the probability of a September cut priced at around 60%. Traders remain cautious about an immediate reduction, as the Federal Reserve’s policymakers have emphasized the need for additional economic data before making any decisions.

Currently, the chance of a rate cut in July is viewed as quite low, standing at just 5%, indicating that most investors believe the Fed will wait for clearer signs of inflation easing. The Fed’s approach suggests a cautious balancing act between controlling inflation and supporting economic growth.

Overall, the inflation data has not deterred traders from anticipating that the Fed will pivot to a more accommodative monetary policy later in the year, signaling continued market focus on inflation trends and central bank actions in the coming months.

Source: Reuters