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Traders have cut their bets on ECB easing and now expect interest rate cuts of less than 125 basis points in 2025.
Treasury yields surged as traders scaled back expectations for a big Fed rate cut this year after the latest data showed the US economy was resilient. Traders scaled back bets that the Fed would cut rates sharply in September, expecting a cut of less than 30 basis points next month. They now expect the Fed to cut rates by a total of 92 basis points for the rest of 2024, down from more than 100 basis points before the data.
Traders cut their expectations for a Fed rate cut after the release of the US CPI data. Chris Anstey, an analyst, said it was worth noting that the annual rate of US CPI inflation in July had now fallen below 3 per cent, the lowest since inflation first ignited in the spring of 2021. The initial volatility in the market was not large. US 2-year Treasury yields are now up more than four basis points, indicating some disappointment that the inflation data has not become more muted.
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