Hot PPI Dampens Expectation of Fed Rate Cuts This Year
TL;DR Summary
A hotter-than-expected February producer price index dampens bets on near-term Fed easing, with December cuts priced in around 60% but not with strong conviction. Odds for June/July/September cuts have fallen as inflation stays elevated due to factors like tariffs, the Iran war, and higher services costs. Markets imply a higher-for-longer path, expecting the fed funds rate to end 2026 near 3.43% versus 3.64% now, as traders await the FOMC decision with hawkish expectations.
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