Investors are pricing in with certainty that a rate cut is coming in September, per the CME FedWatch tool.
US stocks closed higher on Wednesday after investors cheered cooling inflation data and solidified bets for Fed rate cuts.
The Dow Jones Industrial Average and S&P 500 ended the trading session with gains, while the Nasdaq Composite was nearly flat.
The 10-year Treasury yield dipped slightly by one basis point to 3.837%.
Consumer prices continued to cool in July, with inflation rising 2.9% on an annual basis, the Bureau of Labor Statistics reported. That’s lower than the 3% yearly price increase recorded in June, and the slowest pace of inflation recorded since March 2021, adding to the case for the Fed to cut interest rates in September.
Markets are pricing in a rate cut next month with certainty. According to the CME FedWatch tool, traders are betting the Fed has a 65% chance of cutting rates 25 basis points and a 36% chance of cutting rates 50 basis points steeper.
« Today’s CPI release effectively rolls out the red carpet for rate cuts to begin in September », Jason Pride, Glenmede’s investment strategy and research chief, said in a note, adding that the firm sees four rate cuts by the end of the year.
