Fears of elevated interest rates dampened the mood on Wall Street at the start of this year–but cooling core inflation and dovish comments by Federal Reserve governor Christopher Waller have given investors reason to feel a bit more cheerful this week.
After data showed the core consumer price index rose just 0.2% last month, Waller signaled on Thursday that the Fed could slash rates three or four times this year if the data play ball.
It still looks all-but certain that the central bank will hold rates at their current level in January, but the market now thinks there’s a 41% chance the central bank lowers borrowing costs by a quarter of a point in May, according to the CME FedWatch tool. Seven days ago, the odds stood at 32%.
