Cooling Inflation Boosts Odds of June Federal Reserve Rate Cut

Market expectations for a Federal Reserve interest rate cut in June 2026 rose sharply following January inflation data released on February 13, 2026. The Bureau of Labor Statistics reported that the Consumer Price Index rose 0.2% month-over-month, with an annual rate of 2.4%, both figures falling below economist forecasts of 0.3% and 2.5% respectively.

This cooling trend, primarily driven by lower commodity and gasoline prices, shifted interest rate futures. The CME FedWatch Tool indicated the probability of a June cut surged to approximately 83%, while other futures markets priced the likelihood near 70%. Despite this shift, the Federal Reserve System is expected to maintain steady rates during its March meeting.

The potential June rate cut coincides with a leadership transition at the central bank. Current Chair Jerome Powell is expected to be succeeded by Kevin Warsh in May 2026, which would make the June policy shift the first major action of the new tenure.