13 July 2024
The June 2024 inflation report, showing a decrease to 3% year-over-year, has significantly increased market expectations for Federal Reserve interest rate cuts. This data has led to a surge in rate cut bets, with the probability of a September cut rising to 91%. As a result, investors are flocking to interest-rate-sensitive assets, including Treasury bonds, low-yield currencies like the Japanese yen, and gold. The market reaction includes falling Treasury yields, a weakening U.S. dollar, and gold prices approaching all-time highs. This shift in sentiment suggests that investors are increasingly confident that the Fed’s inflation target is within reach, potentially leading to multiple rate cuts by the end of the year.