The chance that the Federal Reserve would raise interest rates again following its next meeting on July 26 is now lower as the U.S. consumer price report for June came in lower than expected.
There is still a 95% chance, according to the CME FedWatch tool, that the Federal Reserve raises its benchmark fed funds rates by a quarter point, to 5.25%-5.50%, on July 26. But after that, things become more uncertain.
The U.S. inflation recorded its smallest annual increase in more than two years in June as price pressure started to slow down in the world’s largest economy.
In June, the consumer price index rose 3% from a year ago, which was the lowest level since March 2021. Meanwhile, prices rose 0.2% in June from a month prior after gaining 0.1% in May. The reading was lower than Dow Jones estimates for 3.1% YoY increase and 0.3% MoM increase.
The possibility that the Fed would raise rates by another quarter point at its September meeting (it skips August) has dropped to 13.3% from 22.3% on Tuesday and 18.1% a week ago. The odds that fed funds will be a half point higher by the end of the Fed’s Nov. 1 meeting are 26.5%, down from 31.6% one week ago.
Meanwhile, odds that rates will be a half point higher than today’s 5.00%-5.25% by the time of the Fed’s last policy meeting of the year on December 13 have dropped to 20.8% from 32.4% on Tuesday and 28% a week ago.
