The consumer price index (CPI) notched a 2.3% year-over-year gain in April, lower than the expectation for 2.4%. The rate of growth was the lowest since February 2021. The CPI also rose by 0.2% month-over-month, below the expectation for 0.3%.
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Rate Cut Odds Stay Steady Following CPI Report
According to CME’s FedWatch tool, there is a 91.7% chance that the Fed leaves rates unchanged between 4.25% and 4.50% during the June meeting, slightly lower than the 91.8% chance yesterday. For the July meeting, traders are pricing in a 63.3% chance that the rate stays steady compared to 61.4% a day ago.
The September meeting is where things could take a turn, as there is a 78.8% chance of a rate drop compared to 79.5% yesterday. By December, there is a 37.1% chance that the rate will be between 3.75% and 4.00%, a 30.1% chance for a rate between 3.50% and 3.75%, and a 19.3% chance for between 4.00% and 4.25%, signaling two rate cuts for the year.
The S&P 500 is set to open slightly higher on the report following strong gains yesterday.
