Fed Rate Hike Expectations Delayed 6 Months Due to Weak Data

Financial markets adjusted their expectations on Friday, delaying the anticipated normalization of monetary policy by the Federal Reserve by six months. This shift followed a disappointing retail sales report and an expected drop in producer prices at the start of the third quarter, raising concerns about the strength of the U.S. consumer to drive economic growth.

In addition, the producer price index, a key inflation indicator, unexpectedly declined in July, further easing pressure on the Fed to implement policy tightening.

Prior to this data release, Fed fund futures indicated a 51.9% chance of a rate hike in December. However, post-data projections showed that the likelihood of a rate increase would not surpass 50% until the June 2017 meeting.

This information came shortly after an interview with the president of the San Francisco Federal Reserve, who maintained a positive outlook regarding economic conditions. Furthermore, economists had previously predicted that the Fed would still consider raising rates, likely during the upcoming December meeting.