Fed rate cuts 'off the menu for now' after hot January inflation report
Pacer ETFs Distributors President Sean O'Hara on earnings season, the Federal Reserve's handling of rate cuts as well as the upcoming CPI and PPI reports.
Inflation ran hotter than expected at the start of the year, pouring cold water on Wall Street's hopes for an imminent interest-rate cut by the Federal Reserve.
The consumer price index, a broad measure of the price of everyday goods including gasoline, groceries and rent, rose across the board in January, rattling investors and triggering a broad market sell-off.
The surprisingly strong inflation data nearly eliminated the already-slim odds of a March rate cut, and also further reduced the likelihood of a May cut to just 30%, according to the CME Group's FedWatch tool, which tracks trading.
FED HOLDS INTEREST RATES STEADY, SIGNALS IT IS NOT READY TO START REDUCING RATES
Federal Reserve Chair Jerome Powell attends a press conference in Washington, D.C., on Nov. 2, 2022. (Liu Jie/Xinhua via / Getty Images)
«Core CPI for January was higher than expected and keeps a Fed rate cut ‘off the menu’ for now,» said Bryce Doty, senior vice president at Sit Investment Associates. «The real Fed fund rate is still restrictive, but that likely won’t be enough to get the Fed to lower rates until there is more certainty that inflation is fully contained.»
The Federal Reserve signaled it was closely watching the report for evidence inflation is continuing to subside as policymakers try to determine what comes next for interest rates in 2024.
Although central bank officials opened the door to cutting interest rates this year during their January meeting, they have pushed back against the market's aggressive expectations.
DOW PLUNGE ACCELERATES, ON PACE FOR WORST DAY OF 2024
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