Market-based inflation expectations fall to their lowest level since September after weaker-than-expected consumer price figures.
One-year U.S. inflation swaps dropped below the Federal Reserve’s 2% target for the first time since September 2024. The decline followed softer-than-expected consumer price data, signaling easing inflation pressures in the near term.
Prior to this, inflation swaps had hovered above the Fed’s target since mid-2023, reflecting persistent inflation concerns. The latest print marks a shift in market expectations, contrasting with earlier forecasts of sustained price pressures.
The move suggests traders are pricing in a higher likelihood of Fed rate cuts in the coming year, though no immediate market reaction was detailed.