Are 2 More Interest Rate Cuts Back On The Table After The Positive December Inflation Report?

Traders think there is a greater likelihood that the Federal Reserve will cut a key interest rate twice in 2025 after a key government report issued Wednesday showed inflation was getting under control.

Investors who gamble on interest-rate futures are now giving nearly even odds there will be two cuts in 2025 with the first coming as early as June, Reuters reported. Before the report, there were expectations of only one cut this year.

Prices rose 0.4% percent and the year-over-year price index increased 2.9 percent according to the December Consumer Price Index released by the U.S. Bureau of Labor Statistics on Wednesday morning.

The biggest increase was blamed on energy costs, which rose 2.6 in December, accounting for over 40 percent of the monthly all-items increase.

The gasoline index increased 4.4 percent over the month. The index for food also increased in December, rising 0.3 percent as both the index for food at home and the index for food away from home increased 0.3 percent each.

Stock futures shot up in pre-market trading after the positive report. The Dow Jones Industrial Average was set to open up around 700 points.

The U.S. central bank voted 11-to-1 in favor of cutting rates by a quarter of a percentage point at the meeting on December 17 and 18, reducing the bank's key lending rate to between 4.25 and 4.50 percent despite an uptick in inflation.

There were concerns that the Fed could completely pause rate cuts in 2025 or even raise rates but those fears appear to be unfounded with the latest economic numbers.