Prices of futures contracts that settle to the Fed's target rate were pricing in only about a 5% chance the Fed will raise its policy rate any higher than the current 5.25% to 5.50% range.
Core inflation, which excludes energy and food, rose 4%, the slowest pace in more than two years.
"You can say goodbye to the rate hiking era," said Brian Jacobsen, chief economist at Annex Wealth Management.
The Fed is now seen as more likely than not to deliver its first rate cut in May, and end 2024 with the short-term benchmark rate a full percentage point lower than today, based on rate futures pricing.
"The Fed for now will maintain its tightening bias, erring on the side of caution," she wrote.
Persons:
Brian Jacobsen, Jerome Powell, aren't, Kathy Bostjancic, Ann Saphir, Lucia Mutikani, Chuck Mikolajczak, Chizu Nomiyama, Jonathan Oatis
Organizations:
Federal Reserve, Labor Department, Energy, Traders, Annex Wealth Management, Nationwide, Thomson
Locations:
U.S