The Federal Reserve might be close to the end of its tightening cycle after more than a year of at times aggressive rate revisions, as signs indicate that inflation is coming down.
Thursday’s producer price index, which measures wholesale prices, showed that inflation came in at just 0.1% for the year ending in June. A day before, the June release of the even-more-closely-tracked consumer price index showed inflation falling to a 3% annual rate, representing a decline of a whole percentage point from the preceding month.
It is almost a certainty that the Fed will hike its target rate by a quarter of a percentage point later this month, but with the latest PPI and CPI readings, many Fed watchers and most investors now bet that the July rate hike will herald the end of its tightening cycle. She said, though, some on the FOMC might push for an “insurance” hike in September given high core inflation and that during the last inflationary plague of the 1970s, the Fed paused too soon and inflation ticked back up.
Investors now assign just about a 13% chance that the Fed will conduct another interest rate hike at its September meeting, according to CME Group’s FedWatch tool, which calculates the probability using futures contract prices for rates in the short-term market targeted by the Fed.
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