Investor hopes for a Federal Reserve rate cut have dimmed as recent producer price data contributes to a tightening outlook. Although there was previously a greater than 95% chance for a cut, this has fallen to about 85% ahead of Chairman Jerome Powell's speech at the Jackson Hole Symposium. Market reactions have been muted, reflecting uncertainty following geopolitical events. Bank of America warns that persistent inflation and tariffs may prolong current interest rates, contrasting earlier market optimism for rate reductions.
Markets are flat this morning as the events of late last week didn't do enough to shift the dial on prospects for better or worse.
The chance of a September cut was being priced in at more than 95% by the market, but now stands at a little under 85%.
Bank of America expects rates to hold, warning tariffs and sticky inflation could keep policy tighter for longer.
The Fed Chair's speech at Jackson Hole is anticipated, as it has previously been the site of tidal changes in monetary policy.
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