After CPI inflation data, fed-funds futures point to potential rate cut in June
Federal-funds futures on Wednesday were pointing to the Federal Reserve keeping its benchmark interest rate at the current level potentially until June, as traders assessed data showing that core U.S. inflation cooled slightly in December.
Traders in the fed-funds futures market largely expect the Fed will keep its benchmark rate at its current target range of 4.25% to 4.5% at its next two policy meetings in January and March, according to the CME FedWatch Tool on Wednesday morning, after an inflation reading from the consumer-price index was released at 8:30 a.m.
Fed-funds futures indicated that traders were less certain about the Fed continuing to pause its rate-cutting cycle at its May meeting, pricing in a 52.5% probability of its policy rate being maintained at the current level, according to the CME FedWatch Tool, at last check.
But after the consumer-price index showed Wednesday morning that the rate of core U.S. inflation slowed slightly in December, traders priced in a greater chance of the Fed lowering its benchmark rate in June, with fed-funds futures indicating just a 31.4% probability of a continued pause.