2024-02-16 15:00:00
© Reuters.
Investing.com – Interest rate-linked futures traders on Friday trimmed bets that the U.S. central bank will start cutting rates in June following a government report showed the producer price index rose more than expected in January.
Ahead of the report, which showed the core measure of the Producer Price Index rose 0.5% from the previous month, traders placed a roughly 75% probability of a first rate cut by the Fed in June. But following the report, the probability of a June rate cut fell to just over 50%, based on the price of federal funds futures.
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Meanwhile, Thomas Barkin, president of the US Federal Reserve Bank in Richmond, said a while ago that the CPI data underscores why the Fed needs more confidence to cut interest rates.
Barkin stressed that January’s economic data was chaotic and not good.
The US producer price index rose more than expected in January, further complicating the inflation problem, according to a Labor Department report issued moments ago, Friday.
The measure, a measure of the prices received by producers of domestic goods and services, rose 0.3% during the month. Economists were looking for an increase of only 0.1%, while the previous reading recorded a decline of -0.1% in December.
The index accelerated compared to expectations, but it slowed compared to the previous reading, as it recorded 0.9% for January, while expectations indicated an increase of 0.6%, and it recorded 1% in December.
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Excluding food and energy, it rose by 0.5%, also once morest expectations for a rise of 0.1%. While the producer price index excluding food, energy and commercial services rose by 0.6%. It was recorded at 2%, while expectations were at 1.6%, and the previous reading had recorded 1.8%.
The report comes just days following the Consumer Price Index showed that inflation remained steadily high despite the Federal Reserve’s expectations of moderation through the year. The CPI rose 3.1% from a year ago, down from its level in December, but still well ahead of the Fed’s target of 2% inflation.
On a core basis, which the Fed focuses more on as a measure of long-term inflation, the CPI rose 3.9%. Where the CPI differs from the Producer Price Index is that it measures the prices that consumers actually pay in the market.
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Markets fell sharply following Tuesday’s CPI reading, and there were concerns that a higher-than-expected PPI number would also cause another jolt to interest expectations.
US stock market futures fell following the producer price index report, along with rising yields.
Besides the troubling inflation readings, the Commerce Department reported this week that retail sales in January fell by 0.8%, much more than expected.
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