How have interest rates expectations changed after the US CPI report?

Rate cuts by year-end

• Fed: 51 bps (99% probability of no change at the upcoming meeting)
• ECB: 25 bps (90% probability of no change at the upcoming meeting)
• BoE: 58 bps (92% probability of no change at the upcoming meeting)
• BoC: 29 bps (72% probability of no change at the upcoming meeting)
• RBA: 74 bps (60% probability of rate cut at the upcoming meeting)
• RBNZ: 27 bps (85% probability of no change at the upcoming meeting)
• SNB: 52 bps (69% probability of rate cut at the upcoming meeting)

*for the SNB, the rest of the probability is for a 50 bps cut

Rate hikes by year-end

• BoJ: 16 bps (100% probability of no change at the upcoming meeting)

Compared to the update at the start of the week here, we haven’t seen much of a change in expectations. Despite a lower than expected US CPI, the market pricing changed by just 5 bps (from 46 bps to 51 bps of easing by year-end). Part of the reason may be that May’s CPI might not yet reflect the tariffs passthrough or that the components that feed into the Core PCE were a bit firmer.

The most notable repricing was seen in the GBP OIS market. Traders ramped up rate cuts expectations from 40 bps to 58 bps at the time of writing following the weak UK labour market report and the UK GDP data. That would be in line with the BoE’s plan to cut by 25 bps every quarter.

This article was written by Giuseppe Dellamotta at www.forexlive.com.