Last-minute certainty delivered to Fed watchers

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For the first time in months, investors had been very much divided on the Federal Reserve’s next move.

Until Tuesday morning.

As our Chart of the Week shows, investor confidence that Jay Powell and the Fed will pause rate hikes completely solidified on Tuesday morning, jumping from 79% to 93% confidence, according to the CME's Fed Watch data.

Wednesday’s inflation decision was thought to have been especially last-minute and dependent on this most recent inflation data. Any surprise surges in inflation could’ve been a potential catalyst for more rate hikes this week.?

But with inflation coming in below expectations — annual price increases totaled 4% in May against expectations for a 4.1% jump — the Fed has evidence its efforts to cool the economy are working.

Or to be precise, investors believe the Fed should see inflation rising at the slowest pace since April 2021 as evidence that its rate hikes are cooling prices.

Or as Jefferies economist Thomas Simons said in a note on Tuesday, this slowdown in inflation is another sign “the Fed is getting what it wants without having to engineer a big slowdown in growth.”?

Which leaves investors, at least this week, asking fewer questions about the next step.

—?Ethan Wolff-Mann, Senior Editor at Yahoo Finance