Investors Expect Fed Rate Cuts as PPI Inflation Data Looms

Investors are betting that the Federal Reserve will end up cutting interest rates sometime this year after Wednesday's cooler-than-expected inflation report.

Traders are now pricing in a chance of more than 70% that the central bank will lower borrowing costs in September, according to the CME FedWatch tool. The odds of a second rate cut before the end of 2025 also stand at above 70%.

The data showed that consumer inflation rose 2.4% in May, below the 2.5% figure that economists polled by FactSet were expecting. Thursday's producer price index report should also give the market a sense of how the Fed is faring in its battle against soaring prices.