#核心PCE与GDP终值 PCE data is in! CME rate expectations shift sharply, Fed rate hike expectations cool rapidly, and global assets receive a turning-point signal

After the release of the US August core PCE inflation data, CME FedWatch interest rate futures data was updated simultaneously, and market expectations for subsequent Fed rate hikes declined significantly. Inflation data came in below expectations, prompting funds to reprice the Fed’s future monetary policy path.
I. Latest CME FedWatch Probability Data
According to the CME FedWatch tool: The probability of a rate hike at the Fed’s October 28 meeting fell to 37.1%. Compared with 50.9% the previous day, this was a sharp single-day decline of 13.8 percentage points. Meanwhile, the market’s expectation that rates will be raised at least once more this year before the end of December fell to 86.8%, down 4.8 percentage points from 91.6% the previous day. By component, the market’s pricing for the year-end interest rate range is as follows:
Federal funds rate rising to 4.00%-4.25%, probability 57.5%​
Federal funds rate rising to 4.25%-4.50%, probability 29.3%
Simply put: After core PCE came in below expectations, traders believe the need for the Fed to continue raising rates in October has declined significantly. The market is no longer certain that a rate hike will occur in October, with the timing of the hike increasingly being pushed back to December.

II. The Logic Behind the Data
Core PCE is the inflation indicator most closely watched by the Fed. This time, the month-on-month increase was just 0.2%, below the market expectation of 0.3%, indicating that the slowdown in US inflation exceeded market expectations.
With inflationary pressure easing, the Fed does not need to continue raising rates aggressively. Expectations for the duration of high interest rates have shortened, which is highly favorable for global growth-style assets.
Falling rate expectations directly trigger a chain reaction: US Treasury yields come under downward pressure, US stock index futures rise rapidly, and gold strengthens in the short term. High-valuation technology growth stocks are the most sensitive to interest rate changes, while sectors such as memory chips, AI computing power, and CPO are seeing valuation pressure ease.
However, one point needs to be viewed objectively: Although the probability of a rate hike in October has declined significantly, the probability of at least one more rate hike this year remains as high as 86.8%. The market has not completely abandoned expectations for a rate hike this year; it has merely postponed the timing of the hike, rather than directly shifting to a rate-cutting cycle. Inflation has not yet returned to the Fed’s 2% target range, and monetary policy remains relatively tight, so this should not be interpreted as全面宽松.

III. Key Areas to Monitor Going Forward
1. The sustainability of the 10-year US Treasury yield.
If yields continue to decline, the recovery logic for growth sectors will continue; if they rebound rapidly, the positive effects will quickly fade.​
2. Fund support after the official US stock market open.
The rise in stock index futures reflects only premarket expectations. It is necessary to observe whether gains can hold after the official open and guard against a pullback as positive news is priced in.
​3. Subsequent US employment, CPI, and other data.
Inflation is dynamic, and an improvement in monthly PCE does not mean inflation will continue to decline.