U.S. inflation data aligned with expectations, reducing bets on a September Fed rate hike and lifting equities.
The U.S. Consumer Price Index met forecasts for both headline and core readings, reinforcing expectations that inflation is cooling. Shelter costs drove two-thirds of the monthly increase, but markets anticipate easing housing pressures could further soften inflation ahead.
Expectations for a September Federal Reserve rate hike fell to 42.1% from 46%, while Treasury yields declined. The 2-year yield dropped 4.2 basis points to 4.176%, and the 10-year yield fell 2.8 basis points to 4.655%. U.S. stocks rose, with the Dow up 150 points and the NASDAQ 100 gaining 100 points in futures trading.
The modestly dovish reaction reflects cautious optimism about the Fed’s policy path, though traders remain focused on upcoming data for further direction.