In last week’s activity feed post, CPI Print Meets Expectations, we noted a few keep points:
- “Inflation slowed for the 10th consecutive month, with CPI coming in at roughly 4.9%, slightly lower than the 5.0% expectations.”
- “As noted in the tweet, with the labor market remaining strong, corporate earnings surprising to the upside, and inflation still at unacceptable levels, a June rate hike cannot be ruled out.”
It is worth revisiting the market expectations around future rate hikes at the time of these CPI prints, and fortunately, we have screenshots.
![target-rate-probabilitie.png target-rate-probabilitie.png](/_ipx/loading_lazy&f_webp&w_666/https://storage.googleapis.com/members-portal-bucket/uploads/2023/05/df08c0e3-target-rate-probabilitie.png)
Last week the market was pricing in a 90%+ chance of a pause (no rate hike) at the June FOMC meeting. Fast forward 8 days, and it seems like reality is starting to set in, again.
![target rate probabilites 5.18.png target rate probabilites 5.18.png](/_ipx/loading_lazy&f_webp&w_666/https://storage.googleapis.com/members-portal-bucket/uploads/2023/05/8c31379e-target-rate-probabilites-5.18.png)
Markets are now pricing in >30% chance of another 25bps rate hike at the June FOMC meeting, up 4x from the 8% probability just 8 days prior. Interesting… let’s continue to monitor how market expectations change as we approach June 14.
The longer I continue to participate in markets while actively managing capital, the more I realize that things are never ‘really’ fully priced in.