Bets on Outsize Fed Cut Gain Steam as Inflation Data Backs Doves

The recent US inflation data has fueled speculation that the Federal Reserve may consider a more substantial interest rate cut. Traders are increasingly betting on the possibility of a larger-than-expected rate reduction as the inflation report suggests a relatively stable price environment. The data showed that the consumer price index, a key measure of inflation, rose at a slower pace than anticipated, indicating that inflationary pressures may be easing. This has strengthened the position of the "dovish" camp within the Fed, who advocate for a more accommodative monetary policy to support economic growth. While the Fed's policymakers have not yet signaled a significant shift in their stance, the market's expectations have shifted towards the potential for a more substantial rate cut in the near future. Investors are closely monitoring the central bank's next moves as they seek to navigate the evolving economic landscape.