Fed funds futures steady as CPI looms, March hold eyed

Fed March hold odds before CPI: 90.3%

Markets were pricing a 90.3% probability that the federal reserve would keep rates unchanged in March before the inflation release, based on data from CME Group’s FedWatch. These probabilities are dynamic and can shift quickly as new information arrives, including macro data and interest rate market moves.

Such market-implied odds reflect traders’ collective view of the most likely near-term policy path. They tend to tighten when data are consistent with the existing policy stance and widen when surprises challenge the prevailing narrative.

How CME Group FedWatch derives market-implied odds

FedWatch translates interest rate market pricing around the March decision into probabilities for each potential target range. The tool aggregates how futures-implied expectations distribute across possible outcomes and continuously updates as contracts move intraday.

Because the inputs are market prices, the resulting probabilities are not forecasts or guarantees. They are a snapshot of prevailing expectations that can reprice materially on fresh economic data or policy communication.

What the CPI report could change for March FOMC

A hotter-than-expected inflation print would typically reinforce a high likelihood of holding rates and could further delay expectations for cuts. Conversely, cooler readings would likely increase the perceived room to consider easing later in the year without implying certainty for March.

The report’s composition matters. Broader disinflation across core categories would carry more weight than a one-off decline, while sticky services or shelter inflation would argue for patience.

BLS CPI scenarios and market implications

The Consumer Price Index is published by the Bureau of Labor Statistics, and its mix across headline and core categories often determines how rates and currencies react. The same headline number can produce different market moves depending on underlying details.

If CPI is hot: odds, USD, yields, mortgages

A hawkish surprise would usually push market-implied odds toward a hold and diminish near-term cut pricing. treasury yields often rise in that scenario, while the dollar tends to firm and borrowing costs can lift.

As noted by Investing.com, “The US dollar continued to gain ground against its major counterparts on Thursday, losing ground again only against the yen.” A similar pattern after a hot CPI could extend dollar strength and keep financial conditions tight.

If CPI is cool or inline: odds and assets

A softer or inline report would likely keep the hold as the base case but raise the probability of earlier easing if disinflation broadens. Yields could drift lower, easing mortgage costs at the margin.

As reported by Yahoo Finance, “The national average 30-year rate took a couple of steps lower to 6.09% this week, according to Freddie Mac.” Sustained disinflation would be consistent with gradual rate relief rather than abrupt shifts.

FAQ about CME FedWatch probability

How could the CPI inflation report before the meeting change those probabilities?

A hotter CPI often increases hold odds and trims cut pricing; a cooler print does the opposite, especially if core disinflation broadens and persists.

What economic indicators (jobs, wages, core PCE) would push the Fed to hike, hold, or cut?

Stronger jobs and wages with firm core PCE argue for holding; broad, sustained disinflation supports cuts later. As reported by Reuters, policy remains data-dependent.