CPI Data Falls Below Expectations, Fed July Rate Hike Bets Drop to 20%

Odaily reported that as consumer price data came in lower than expected, traders have withdrawn their bets on a Federal Reserve rate hike, driving a sharp rise in U.S. Treasury prices. The two-year Treasury yield, highly sensitive to the near-term outlook for Fed monetary policy, fell by as much as 14 basis points to 4.14%, marking its largest single-day decline since February. Meanwhile, interest rate swaps show that the probability of the Fed raising rates in July has fallen from over 40% to approximately 20%.

Dan Carter, senior portfolio manager at Fort Washington Investment Advisors, stated: "This is a broad-based miss on the data. The possibility of a near-term rate hike is now off the table. The market had been worried about inflation coming in too high, so this data should be positive for the bond market and help steepen the yield curve. Our baseline expectation is that the Fed will hold rates steady, and this data confirms that view." (Jin Shi)