Markets price a 50% chance of a July Fed rate hike as inflation data and testimony weigh on expectations.
Today’s US CPI release and Fed Chair testimony will shape interest rate expectations for the summer, with markets assigning roughly even odds to a July hike. Core inflation, expected at 0.2%, faces upside risks that could push the print to 0.3% due to rounding effects.
Investors are also pricing in over 25 basis points of tightening by September, though recent Fed communications have not signaled an imminent move. Headline inflation may ease due to lower gas prices, but core components like lodging and transportation remain key drivers.
Volatility is anticipated as traders react to the data, which could stabilize front-end rates if inflation cools or accelerate hike bets if core pressures persist.