The Federal Reserve is unlikely to cut interest rates before September, following a higher-than-expected inflation report on Wednesday, according to market pricing.
Federal Reserve Chair Jerome Powell, in his recent testimony before Congress, acknowledged that while progress has been made in reducing inflation from its peak levels, it remains above the Federal Reserve’s 2% target. He emphasised the importance of maintaining restrictive monetary policy to guide inflation back to the desired level.
Futures markets, which had anticipated a June cut, now suggest no moves until the fall, with little chance of another before late 2025. The January consumer price index (CPI) showed a 0.5% monthly increase, raising the annual inflation rate to 3%. Core inflation, which excludes food and energy, climbed to 3.3%, remaining well above the Fed’s 2% target.
These developments have led investors to anticipate a more cautious approach from the Federal Reserve regarding monetary easing. The potential delay in rate cuts could influence market volatility, affecting both equity and bond markets as participants adjust their strategies in response to the evolving economic landscape.
