How have U.S. inflation data affected Federal Reserve interest rate expectations?

Market expectations and investor pricing for the upcoming interest rate decision by the Federal Reserve at the Federal Open Market Committee meeting next November have shifted following the release of U.S. inflation data today after the announcement of the minutes from the Federal Open Market Committee meeting yesterday.

According to the data from the CME FedWatch tool, traders on Thursday increased their bets that the Federal Reserve will lower interest rates by 25 basis points in November, with a probability of 87%, after data showed that inflation last month was slightly stronger than expected.

The report showed that the Consumer Price Index rose by 2.4% in September compared to the same month last year, which is higher than the 2.3% anticipated by the markets, but also lower than the previous reading for August, which was 2.5%.

After the report, investors moved to abandon bets that the Federal Reserve might pause at next month’s meeting, as traders now see a 25 basis point cut in the federal funds rate at each of the upcoming meetings.