Expectations spike for a Fed rate cut

It now looks like we are going to get a rate cut this quarter after all.

Driving the news: After this morning's very benign inflation report, the CME Fed Funds futures markets spiked to pricing in a 95% probability that the Fed will cut in September, if not this month.

The big picture: At the start of this year, markets were sure there would be at least one rate cut by September, with most market participants expecting five cuts by then.

• But inflation and employment numbers both came in hotter than expected, and it started becoming obvious that many cuts wouldn't be arriving anytime soon.

The bottom line: The doves are back, although the timetable for getting to five rate cuts has been pushed back to at least April, per CME traders.