The market had reflected as much as a 28% chance of a rate increase for January before the Labor Department’s report, which showed the consumer price index rose only 3.2% compared to the previous year, after having increased 3.7% in September.
Energy prices, a key point for consumers, fell 2.5% in October compared to September .
Core inflation, which excludes energy and food, rose 4%, the slowest pace in more than two years. While still well above the Federal Reserve’s 2% target, the downward trend could give Fed policymakers more confidence that their stance is tight enough to take effect.
In fact, operators and many analysts perceive it that way.
“You can say goodbye to the era of rate hikes,” said Brian Jacobsen, chief economist at Annex Wealth Management.
The market now believes that the Federal Reserve is more likely to implement its first rate cut in May and end 2024 with the short-term reference rate one percentage point lower than the current one, based on futures prices.