The inflation report suggested not only that pressure on U.S. households’ budgets is amplifying but also that traders on Wall Street were correct to forecast the Federal Reserve will deliver less relief for Americans through lower interest rates this year.
Treasury yields also remained notably higher in the bond market, cranking up the pressure on financial markets after the morning’s report said U.S. consumers had to pay higher prices for eggs, gasoline and other costs of living than economists expected.
When a 10-year Treasury, which is seen as one of the safest investments possible, is paying that much in interest, investors are less likely to pay high prices for stocks, which carry a higher risk of seeing their prices go to zero.
The Fed had cut its main interest rate sharply from September through the end of last year, intending to make borrowing cheaper, help the economy and boost prices for stocks, bonds and other investments.
Following January’s discouraging inflation data, traders are betting on a 29% chance the Fed will not cut rates at all this year, according to data from CME Group.
