Both the S&P 500 (SPX) and the Nasdaq 100 (NDX) are trading lower ahead of the Fed rate decision at 2 p.m. Eastern Time today. The consensus expectation is for the central bank to hold rates steady, although rate cut odds for the rest of the year are plunging following a higher-than-expected inflation report.
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New trading tool for QQQ bullsIn February, the U.S. Producer Price Index (PPI) increased by 3.4% year-over-year, marking the highest level in 12 months and well above the consensus estimate of 3.0%.
Oil Shock Risks May Delay Rate Cuts
February’s PPI doesn’t include the impact of rising oil and gas prices as a result of the near standstill at the Strait of Hormuz. That creates the risk of accelerating inflation in March’s reading.
In fact, the Fed may decide to leave rates unchanged for the entire year, according to the CME FedWatch tool. Higher rates counter inflation by raising borrowing costs and reducing consumer and business spending. The odds of rates staying between 3.50% and 3.75% by year-end sit at 39.1%, up from 30.5% a day ago, while the odds of one rate cut are slightly higher at 40.3%.