Cartons were displayed at a grocery store and warned that the eggs will be restricted in New York City on February 10, 2025 as the bird flu continues to affect the egg industry.
Spencer Platt | Getty Images
According to updated market pricing, the Federal Reserve’s interest rate cuts will not expire until at least September after Wednesday’s inflation report.
The futures market has shifted from expectations of cuts in June to layoffs before the end of the year, and it will not be possible to follow up by the end of 2025 until the fall.
“The Fed will see hot inflation prints in January, confirming that price pressures continue to bubbling under the economic surface,” Bill Adams, chief economist at Comerica, wrote in a comment. “This will strengthen the Fed at least at the moment The tendency to reduce or even final rates in 2025.”
After January, optimism about the Fed has decreased Consumer Price Index Report Showing a monthly increase of 0.5%, boosting annual inflation to 3%, with a contact point higher than December and just slightly lower than 3.1% in January 2024 reading. The news is even worse than food and energy, with a ratio of 3.3%. This shows that the Fed tends to rely more on core inflation and is increasingly higher than the central bank’s target.
Fed chair Jerome Powellin a Wednesday appearance on the House Financial Services Committee, insisted that the central bank had made “huge progress” in inflation since the cyclical peak, but we have not arrived yet. Therefore, we hope to maintain policy restrictions for the time being. ”
Fed Chairman Jerome Powell testified at the House Financial Services Committee’s hearing on Congress on the “Semi-Annual Monetary Policy Report” on Capitol Hill in Washington, DC, USA on February 12, 2025.
Nathan Howard | Reuters
With the Fed’s inflation rate of 2%, and the report does not show recent progress, it also hopes that the central bank will look at further policies if appropriate after lowering the full percentage point of its benchmark short-term borrowing rate in 2024.
Fed funds futures trading noted that the opportunity for the march was only 2.5%. According to May, June could reach up to 22.8% when July was 41.2% and finally at the highest in September. CME Group’s FedWatch As of Wednesday morning. However, this will keep the probability surfaced until October, with pricing for futures signings meaning a 62.1% probability.
By the end of 2025, the chance of a second cut was only 31.3%, and pricing did not indicate another reduction until the end of 2026. The current target of Fed funding interest rates is 4.25%-4.4.5%.
The issues raised in the CPI report do not occur in isolation. Policymakers are still watching White House trade policy, President Donald Trump Promote positive tariffs This could also increase prices and complicate the Fed’s desire to achieve its goals.
“There is no fact that this is a hot report and in a sense that potential tariffs create a rising risk of inflation, so it is understandable that the Fed will find a reasonable view to cutting the near-difference tax rate. .
The Fed is focusing on CPI and other similar price measures, but its preferred inflation table is the personal consumption expenditure price index, which the Bureau of Economic Analysis will release later in February. Elements in the CPI filter enter PCE reading, and Citigroup said it expects Core PCE to drop to 2.6% in January, down 0.2 percentage points from December.
