Reserve

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  Neither the author, Ruholamin Haqshanas, nor this website, The Tokenist, provide financial advice. Please consult our&nbsp;<a href="https://tokenist.com/terms-of-service/" style="text-decoration:underline;color:#3c7b7b" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">website policy</a>&nbsp;prior to making financial decisions. 
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<p class="has-drop-cap">Market projections <a aria-label="show  (opens in a new tab)" href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">show </a>there is over a 90% chance that the Federal Reserve will cease rate hikes. The surge in expectations that the Fed will opt for a pause comes after new <a href="https://tokenist.com/macro-review-cpi-as-expected-jobless-claims-grow/" rel="noopener noreferrer nofollow" class="deco-link">inflation data</a>, which showed that the annual rate came lower than the estimated 3.3%.&nbsp;</p> 
<h3 id="july-inflation-lower-than-expected">July Inflation Lower Than Expected</h3> 
<p>According to the CME FedWatch tool, the odds that the US central bank will pause rate hikes after the latest consumer price index (CPI) report are more than 90%. The tool allows investors to monitor and interpret the probability of changes in the US Federal Reserve’s monetary policy decisions based on futures market pricing.</p> 
<p>Markets widely expect the Fed to slam on the brakes after the new CPI print showed that inflation rose less than anticipated in July. In particular, the annual inflation rate stood at 3.2% last month, compared to the consensus projection of 3.3% and the <a href="https://tokenist.com/us-cpi-fell-to-3-in-june-fed-expected-to-continue-with-rate-hikes/" rel="noopener noreferrer nofollow" class="deco-link">June reading of 3%</a>.</p> 
<p>Monthly, inflation climbed 0.2%, matching the economists’ expectations. Annual <a aria-label="core CPI (opens in a new tab)" href="https://www.bls.gov/news.release/cpi.nr0.htm" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">core CPI</a> – which ignores volatile food and energy costs – also came in lower than expected at 4.7% versus the projected 4.8%.&nbsp;</p> 
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<h3 id="fed-s-aggressive-rate-hiking-campaign">Fed’s Aggressive Rate-Hiking Campaign</h3> 
<p>Even though the annual CPI of 3.2% was the first time the rate increased since the Fed started hiking rates last year, the overall report shows that inflationary pressures are waning, relieving some of the pressure on the central bank to keep raising rates.</p> 
<p>The Fed has been raising elevating funds rate almost non-stop since March 2022, reaching a target range of 5.25% – 5%, the highest in more than 22 years. The latest hike was delivered in late July when the policymakers <a href="https://tokenist.com/chances-of-a-25-bps-hike-at-98-9-as-fomc-decision-due-today/" rel="noopener noreferrer nofollow" class="deco-link">raised the rates by another 25 basis points</a> (bps).</p> 
<p>The Fed faced some backlash that its aggressive rate-hiking campaign could tip the US economy into recession. However, the central bank’s belligerent is bearing fruit when bringing inflation down. The annual CPI rate fell by nearly 6% from its <a href="https://tokenist.com/cpi-inflation-at-9-1-beats-highest-estimates/" rel="noopener noreferrer nofollow" class="deco-link">40-year high of 9.1% reached in June 2022</a>.&nbsp;</p> 
<p>Still, while the Fed is likely to pause hikes for the moment, it is unlikely that the bank will begin cutting interest rates anytime soon, given that the CPI remains notably higher than the <a aria-label="desired 2% level (opens in a new tab)" href="https://www.cnbc.com/2023/02/20/the-federal-reserves-2percent-inflation-targeting-policy-explained.html" target="_blank" rel="noopener noreferrer nofollow" class="deco-link">desired 2% level</a>.&nbsp;</p> 
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<p><em><strong>When do you expect inflation to drop to the Fed’s target 2%? Let us know in the comments below.</strong></em></p> 
<p>The post <a rel="noopener noreferrer nofollow" href="https://tokenist.com/cme-data-shows-a-90-5-probability-of-fed-pausing-after-july-cpi-print/">CME Data Shows a 90.5% Probability of Fed Pausing After July CPI Print</a> appeared first on <a rel="noopener noreferrer nofollow" href="https://tokenist.com">Tokenist</a>.</p>

CME Data Shows a 90.5% Probability of Fed Pausing After July CPI Print

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