Market Expectations vs. Reality: The Federal Reserve’s Next Steps

After the release of the September 2024 US Consumer Price Index (CPI) figures, the futures market remains priced in for a total of -50 basis points (bp) of Federal Reserve interest rate cuts by the end of the year. This reflects a shift in the Federal Reserve’s approach as September’s headline CPI inflation rate was 2.4% year-on-year (YoY), down slightly from 2.5% in August. However, the finer details of the inflation data present a more complex scenario, challenging the assumptions about further significant cuts.

Key Inflation Metrics and Their Impact on Rate Cuts