US interest rate futures show increased probability of Fed rate cut in June

Summary

Following a report of lower-than-expected US inflation in January, US interest rate futures have priced in a higher probability of a Federal Reserve rate cut in June, with the odds rising to 69% from 63% before the data release.USHK News+ 3 Concurrently, the market’s expectation for total rate cuts throughout 2026 increased from 58 to 61 basis points.Sina Finance This market reaction comes after the Fed held rates steady at its January meeting, emphasizing the need for patience and more data before easing policy.Investinglive+ 2

Impact Analysis

So the market is jumping on one soft CPI print to push the odds of a June cut to nearly 70%USHK News+ 2. This isn’t a huge surprise; it just confirms the market’s desperation for a dovish pivot. They’ve also nudged up the total easing for the year to 61 bps, which is barely over two cutsSina Finance.

What’s interesting is how fragile this consensus is. Remember, the Fed just stressed patience in JanuaryInvestinglive+ 2, and a single data point doesn’t make a trend. The market is basically betting that this is the start of the sustained weakness the Fed needs to see. While this supports the soft-landing narrative and risk assets for now, it feels like a crowded trade built on shaky ground. Any hot data point in the coming months could cause a sharp reversal. The play here might be to look at volatility trades around future data releases, as these expectations are bound to swing.