Traders Anticipate Fed Rate Cut in December

Recent inflation data has led traders to increase the probability of a quarter-point interest rate cut by the Federal Reserve in December to 80%, up from 60%. The Consumer Price Index (CPI) rose by 2.6% year-over-year in October, aligning with expectations and suggesting a stable inflation outlook, though core inflation remains elevated. Fed's Neel Kashkari emphasized that any decision to pause rate cuts would depend on unexpected inflation spikes, indicating the economy is still moving towards the 2% target but may take longer. Additionally, comments from Fed officials reflect a cautious approach regarding future monetary policy, with a focus on the impact of potential growth from upcoming elections. The market anticipates a slower pace of rate cuts next year, pausing once the policy rate reaches the 3.75%-4% range. Key upcoming data, including US PPI and retail sales, will further inform the Fed's decisions.