Fed is now expected to hold on to rate cuts until at least May

In light of government data released on Tuesday indicating that consumer prices unexpectedly increased in November, the Fed is anticipated to postpone any interest rate reductions until at least May of next year.

The Fed is now betting that it will decrease the policy rate to a range of 5%–5.25% in May, with more reductions expected later in the year, according to futures contracts linked to the policy rate.

Prior to the news, which revealed that the consumer price index increased 0.1% in October of last year, traders were more certain that a decline in inflation would enable the Federal Reserve to remove its policy rate hold earlier. However, following the report, the previously observed almost 50% possibility of a March rate decrease was reduced to around 40%.

As the Fed lowers borrowing costs in step with inflation expectations that are projected to ease, traders are still betting for a total of around 4 rate cuts early in 2019. The CPI increased 3.1% in November over the previous year, above the Fed's aim of 2% inflation.

At their final meeting of the year, which takes place tomorrow, Fed policymakers are almost generally expected to keep interest rates where they are—between 5.25% and 5.5%. Additionally, they plan to release estimates outlining their own opinions regarding the probable future trajectory of rates.

(Sources: investing.com, reuters.com)