Futures traders are lowering their expectations for an interest rate cut in the U.S. this March.
Bets on a 25-basis point rate cut from the U.S. Federal Reserve at its March meeting have now fallen to 50%, down from as high as 81% on Jan. 12.
The declining odds of a March rate cut come after a series of strong economic data in recent days, including December retail sales that were better than expected.
There have also been reports in recent days that inflation unexpectedly rose in several countries during December, including in the United Kingdom (U.K.) and Canada.
The strong economic data and rise in inflation now has futures traders anticipating that the U.S. central bank will hold interest rates higher for longer.
Still, traders continue to expect that the U.S. central bank will reduce interest rates this year after aggressively raising them over the past 18 months.
Since the start of 2022, the Fed has lifted its benchmark interest rate to a peak of 5.5% from 0.25%.
Markets are now pricing in a reduction in U.S. interest rates of 140 basis points, down from 175 basis points previously.
The reassessment has pushed U.S. Treasury yields higher in recent days, with the benchmark 10-year Treasury note currently at 4.08%, its highest level in more than a month.
The U.S. Federal Reserve is scheduled to make its first interest rate announcement of the year on Jan. 31.
