Fed Rate Hike Odds Plunge Amid Cooling Inflation and Weak Economy

Market expectations for a Federal Reserve rate hike in September have dropped to about 30% as inflation, employment, and consumer spending continue to cool. Jeremy Siegel, senior economist at WisdomTree and professor of finance at Wharton School, believes that as long as oil prices remain stable around $80 per barrel, the Fed is likely not to raise rates.

The S&P 500 Index broke above 7,800 points for the first time, driven by a rebound in risk appetite. Cooling inflation, corporate earnings growth, and AI-driven efficiency gains have led to this market shift.

Market pricing of the probability of a September rate cut has increased, with some traders scaling back their bets on rate hikes for the year. The weakening employment and spending data implies that the US economy no longer faces just an inflation problem but also slowing demand momentum.