Professor at Northwestern University. Teach finance at UC-Booth. Former Economist and Senior Policy Advisor at Federal Reserve and Professor at UMich and Yale.
The CPI came in hot enough to move Fed Fund Future implied odds of a September hike to 85%. However, the inflation reading was cool enough that the market expectations for the end of the tightening cycle didn't move much.
The FF future implied odds for year-end remained centered around 2 hikes and the odds of more than two hikes by year end increased by only 2% while the odds of 1 or fewer hikes declined by just under 5%.
Future prices still see 3 hikes by mid-2027 as the likely stopping point and today's CPI report actually lowered uncertainty about that estimate.
The FOMC rarely surprises the market at a regular scheduled meeting. If they were to leave rates unchanged next week this would be the biggest "surprise" at a schedule meeting since 1994 when the Fed held rates fixed despite the market pricing in a rate hike.