US stocks plunged on Wednesday after another higher-than-expected inflation print, causing the three major averages to drop, with the Dow losing over 400 points. The odds of a June rate cut have been slashed as the Fed looks poised to continue its inflation fight.
Investors were taken aback by the latest inflation report, which showed a 3.5% increase on an annual basis in March, slightly above economists’ expectations. Core inflation, which excludes volatile food and energy prices, grew 3.8% year-over-year, also surpassing expectations.
As a result, traders adjusted their expectations for Fed rate cuts this year, with the odds of a June rate cut falling to just 16%. Bank of America, Barclays, and Goldman Sachs all revised their outlooks on rate cuts, citing the persistent hot inflation numbers.
The Federal Reserve, which had previously projected three rate cuts in 2024, remains cautious about the recent uptrend in inflation. Newly released minutes from the March policy meeting revealed that central bankers are waiting for more evidence before considering any rate adjustments.
Market analysts expressed concerns about the Fed potentially waiting too long to act, as the risk of moving too slowly is increasing. The Fed’s focus on backward-looking data and its reluctance to act quickly on inflation have raised questions about the central bank’s strategy moving forward.
Despite the market turmoil, commodities saw mixed movements, with oil prices climbing, gold slipping, and the 10-year Treasury yield jumping significantly. Bitcoin also experienced a slight increase in value amidst the market volatility.
Overall, the uncertainty surrounding inflation and the Fed’s response has left investors on edge, with many closely monitoring economic indicators for any signs of future policy changes.
