Benign inflation data has revived the case for additional Federal Reserve interest-rate cuts.
On Wednesday, the 10-year Treasury yield fell 14 basis points to 4.65%, its biggest daily decline since August. The drop in yields occurred as traders resumed betting on another Fed rate cut by July.
Traders ignored the strong December employment data released Friday, which sparked a surge toward the highest levels in months as it sowed doubts that policymakers would cut rates at all this year. The 10-year peaked Tuesday at nearly 4.81%, more than a full percentage point higher than when the Fed began easing in September.
“The report gives support to those in the market and at the Fed that the next move by the Fed is still to ease rates,” said Jack McIntyre, portfolio manager at Brandywine Global Investment Management. “Given that inflation is the critical variable, it probably means 10s can start to consolidate between 4.50% and 4.80% for a while.”
The December Consumer Price Index report showed that the rate of increase for core prices slowed for the first time in five months. Along with resilient US economic data, its re-acceleration had suggested that the Fed — which cut rates three times last year by a combined 100 basis points to arrest an increase in unemployment — may have acted prematurely.
Core prices rose 0.2% in December and 3.2% from a year earlier, down from 3.3% in November. The broader consumer price index matched expectations as rose 2.9% in December from a year earlier.
Speaking after the release, New York Fed President John Williams said “the process of disinflation remains in train,” but that the central bank’s 2% price stability goal needs more time. The Fed targets a different inflation gauge that rose 2.4% year-on-year in November. Later Wednesday, Chicago Fed President Austan Goolsbee said it remained possible to tame inflation without causing a recession.
At their last meeting in December, Fed policymakers released forecasts showing they anticipated cutting rates by 50 basis points in 2025. Their previous quarterly forecast was for an additional 50 basis points of easing.
Interest-rate strategists at Morgan Stanley recommended that investors position for a cut as soon as March. Yet bond traders in recent weeks also cited the prospect of inflationary trade policies under President-elect Donald Trump, who takes office next week, as a reason to be bearish.
“I don’t know how much more we can push Trump policy shocks before we get eyeballs on some details,” said Ed Al-Hussainy, a rates strategist at Columbia Threadneedle Investment.
Read More Details
Finally We wish PressBee provided you with enough information of ( Cooling inflation revives hopes for Fed rate cuts )
Also on site :
- Halle Berry risks wardrobe malfunction on Met Gala 2025 red carpet with strategically placed stripes
- Maluma Honors Pachuco Culture in Zoot Suit at Met Gala 2025
- Zendaya Suits Up for Her Most Unexpected Look to Date at 2025 Met Gala