Emerging Markets Soar as Soft US Inflation Data Slows Fed Rate Hike Bets

The US Consumer Price Index (CPI) has shown a monthly decrease of 0.4%, with the annual rate slowing to 3.5%, and core CPI remaining flat.

This softer inflation data has led market participants to reassess the Federal Reserve's monetary policy outlook, with previous months' figures keeping pressure on the central bank to consider further tightening.

Emerging-market assets have rallied as a result, suggesting a potential delay in Fed rate hikes. Market pricing for a September 2026 Fed rate hike has dropped to 28% YES, down from 31% just 24 hours ago, while the October 2026 meeting's rate hike probability has also decreased, now at 39.5% YES.

Federal Reserve Chair Jerome Powell and the Federal Open Market Committee (FOMC) are key actors to monitor for any shifts in policy language or statements suggesting a change in the rate outlook.