Source: Bloomberg
Author: liz capo mccormick
After the data report shows that the pressure of inflation in the United States is still continuing, the trader has lowered the expectations of the Federal Reserve's interest rate cut in July in July.
The exchange contract linked to the Federal Reserve's conference shows that only 32%of the probability of interest rate cuts in May, which is lower than 64%before data announcement.The trader is expected to cut interest rates within 90 base points during the year.The yield of 2 -year Treasury bonds that are sensitive to interest rates rose 17 basis points to 4.64%after the CPI was announced.
Bond investors have always expected to use the Federal Reserve to cut interest rates at the end of the past two years.However, Fed officials said they needed more evidence to show that the inflation rate was falling at 2%of the target.
"The inflation rate is beyond expected," FIRST CITIZENS Bank Wealth Market and Economic Research Director Phillip Neuhart said."This makes the Fed's work more difficult. We are still expected to cut interest rates later this year, but the latest data makes people suspect that interest rates may not be lowered in the short term."
Even the interest rate cut in June began to make people dare not be sure, although the trader seemed to think that this was the most likely result again.
Short -term government bond yield leads the bond market, but the yields of each period have reached the highest level since this year.30 -year yields rose 7%to 4.45%.The 10 -year Treasury yield climbed 12 basis points to 4.30%.
It is not only the US debt market that is affected.Within a few minutes after the data was released, the market trend became very turbulent. The European Futures Exchange (Eurex), the main exchange of German Treasury futures, once suspended 5 -year and 10 -year contract transactions.
Earlier that day, traders cut the betting of the British Central Bank's interest rate cuts. Due to the data show that the British wages increased more than expected, the market adjusted the predicted first rate cut from August to September.
"This is not good news," Jay Bryson, chief economist of Wells Fargo, said when talking about CPI data on Bloomberg TV."But the Fed will not make policy decisions based on a single data. There is still some time from May."
CPI data released on Tuesday shows that inflation and cooling are less than expected by economists. The overall CPI increased to 3.1%, and the core inflation rate of eliminating food and energy held a stable at 3.9%.
Personal consumption expenditure (PCE) favored by Federal Reserve decision makers is different from the CPI computing method.Compared with the CPI, the increase in the PCE price index has always been closer to the Fed's 2%goal.
