Fed rate cut odds below 3%

CME FedWatch showed on May 15 that traders were assigning less than a 3% probability to a Federal Reserve rate cut at upcoming policy meetings, according to CME’s rate-probability tool. The shift followed a run of April U.S. data this week that pointed to firmer inflation and still-rising consumer spending. Federal Reserve H.15 data published Thursday showed the 10-year Treasury yield at 4.46% and the 30-year at 5.03%. The market move left investors repricing how long the Fed may keep its benchmark rate in the current 4.25%-4.50% range, based on FedWatch’s methodology and current Treasury yields. ### What pushed rate-cut odds that low? April inflation data released this week came in hotter than the prior month. The Bureau of Labor Statistics said on May 12 that the consumer price index rose 0.6% in April after a 0.9% increase in March, with the annual CPI rate accelerating to 3.8% from 3.3%. Core CPI, which excludes food and energy, rose 0.4% on the month and 2.8% from a year earlier. (cmegroup.com) Producer prices added to that picture on May 13. The Bureau of Labor Statistics said its final-demand producer price index rose 1.4% in April, after gains of 0.7% in March and 0.6% in February. The agency said that was the largest monthly increase since March 2022, while the 12-month rise reached 6.0%. ### Did the consumer side of the economy also stay firm? (bls.gov) April retail sales rose again. The Census Bureau said on May 14 that advance retail and food services sales increased 0.5% from March to $757.1 billion, and were up 4.9% from a year earlier. March sales were revised to a 1.6% monthly increase from 1.7% previously. (bls.gov) Nonstore retailers posted one of the biggest year-over-year gains. The Census Bureau said nonstore retailers were up 11.1% from April 2025, while food services and drinking places rose 2.7% from a year earlier. ### What exactly does FedWatch measure? CME Group says FedWatch tracks the probability of changes to the federal target rate as implied by 30-Day Fed Funds futures prices. (census.gov) CME says media should attribute those probabilities to “CME FedWatch,” and its methodology page says the tool translates futures pricing into probabilities for possible Federal Open Market Committee outcomes. The federal funds target range now stands at 4.25%-4.50%. FedWatch probabilities do not represent a policy statement from the Federal Reserve; they are a market-based reading of where traders think the target range could be after upcoming meetings, based on futures prices. That is an inference from CME’s methodology and the current target range. (cmegroup.com) ### Why did Treasury yields move with it? Federal Reserve H.15 data published Thursday showed long-dated Treasury yields near recent highs. The 10-year Treasury constant maturity yield was 4.46%, up from 4.42% the previous day, and the 30-year was 5.03%, up from 4.98%. The 20-year yield was 5.02%. Those yields matter because Treasury markets are one of the main channels through which investors express views on future inflation, growth and Fed policy. (cmegroup.com) When inflation data and spending data come in stronger than expected, futures and bond markets can move together as traders reprice the likely path of short-term rates. That link is an inference drawn from the timing of the releases and the market data. (federalreserve.gov) ### What comes next on the calendar? June 17, 2026 is the next scheduled release date for the Census Bureau’s advance monthly retail sales report. The Bureau listed that date in the April retail sales release published on May 14. The Federal Reserve’s next policy meeting is 34 days away, CME FedWatch showed when accessed on May 15. (federalreserve.gov) That countdown points to the next Federal Open Market Committee decision in mid-June, when traders will get the next official rate decision against the backdrop of this week’s inflation, producer-price and retail-sales data. (cmegroup.com) (www2.census.gov)