Jerome Powell to Rates Traders: I Told You So.
It took worse-than-expected (and quirky) inflation reports for markets to finally buy into the rates trajectory that policymakers projected all along.
Pay attention.
Photographer: Samuel Corum/Bloomberg
The bond market is selling off again, but Federal Reserve interest-rate cuts haven’t been canceled — perhaps just delayed.
The latest market tantrum came after the Labor Department reported that its core producer price index increased 0.5% in January from a month earlier, exceeding the consensus estimate of 0.1%. In the fed funds futures market, the data brought the expected odds of a May rate cut down to about 1-in-3. In all of 2024, the futures market now expects about three rate reductions, down from the six (and at one point nearly seven) that were implicitly expected in January.