The Fed's inflation problem

In a keynote address at Stanford last week, Federal Reserve Chair Jerome Powell said , “The recent data do not... materially change the overall picture, which continues to be one of solid growth, a strong but rebalancing labor market, and inflation moving down toward 2% on a sometimes bumpy path.”

That picture may have changed yesterday, as March’s CPI numbers came in surprisingly hot at 3.5%.

That marks 10 months without the CPI falling below June 2023’s 3% mark. The Fed hasn’t changed its expectations of three rate cuts in 2024, but traders are beginning to call its bluff.

On Monday, it looked like the odds of a June rate cut had fallen from almost 100% certainty to a coin flip . Today, the odds are 77.5% that we see zero rate cuts by June.

Hot Inflation Report Derails Case for Fed June Rate Cut

That marks 10 months without the CPI falling below June 2023’s 3% mark. The Fed hasn’t changed its expectations of three rate cuts in 2024, but traders are beginning to call its bluff.

On Monday, it looked like the odds of a June rate cut had fallen from almost 100% certainty to a coin flip . Today, the odds are 77.5% that we see zero rate cuts by June.