Emerging-market stocks and currencies have rallied following a decline in a key U.S. inflation measure, which has strengthened market expectations that the Federal Reserve may not need to raise interest rates in the near term. The U.S.
Consumer Price Index (CPI) showed a monthly decrease of 0.4%, with the annual rate slowing to 3.5%, and core CPI remaining flat. This softer inflation data has led to a reassessment of the Fed’s monetary policy outlook, as previous months’ figures had kept pressure on the central bank to consider further tightening. Market participants appear to interpret this development as reducing the likelihood of a rate hike by the September 2026 meeting. Key Takeaways
Emerging-market assets appear to benefit from the softer U.S. inflation data, suggesting a potential delay in Fed rate hikes. Market pricing for a September 2026 Fed rate hike has dropped to 28% YES, down from 31% just 24 hours ago.
The October 2026 meeting’s rate hike probability has also decreased, now at 39.5% YES, reflecting the impact of the inflation data. What to Watch
Federal Reserve Chair Jerome Powell and the Federal Open Market Committee (FOMC) are key actors to monitor for any shifts in policy language or statements suggesting a change in the rate outlook. Further inflation data releases or economic indicators could influence market expectations on rate hikes. Any significant geopolitical or financial developments may also impact the Fed’s policy decisions and market pricing for future rate hikes. Get live prediction-market analysis, powered by Vera.
Sign up for Vera. Disclosure: This article was edited by Estefano Gomez. For more information on how we create and review content, see our Editorial Policy.
