Inflation Drops to 2.4%, Markets Price In 75% Chance of June Fed Cut

**TL;DR:** Annual inflation fell to 2.4% in March, the lowest in over two years, pushing markets to price in a 75% chance of a Fed rate cut in June.

The latest Consumer Price Index report delivered what Wall Street has been waiting for. Headline inflation dropped to 2.4% in March from 2.7% in February, marking its lowest level since early 2022 and moving within striking distance of the Federal Reserve's 2.0% target.

Market reaction was immediate. The 10-year Treasury yield fell roughly 15 basis points in early trading, while S&P 500 and NASDAQ futures surged over 1% in pre-market hours. Rate-sensitive sectors—technology and real estate investment trusts—led the rally. The CME FedWatch tool now shows a 75% probability of a 25-basis-point cut at the June FOMC meeting, up from roughly 50% just a week ago.

"This is the Goldilocks report everyone wanted," said a senior market strategist at a major investment firm. "Inflation is retreating without the labor market collapsing. It gives the Fed the green light to begin normalizing rates."

Three forces drove the cooling. Energy prices stabilized despite geopolitical tensions, pulling transportation and manufacturing costs down. The shelter component—historically sticky—finally eased as a wave of new apartment completions increased supply. And improved supply chain efficiency, including AI-driven inventory management, reduced retailer overhead.

Core CPI, which strips out food and energy, also slipped to 2.6%, further validating the disinflation trend.

**What it means:** The "higher for longer" narrative on Wall Street has shifted. If the Fed cuts in June, borrowers could see relief on mortgages and auto loans within months. Watch next month's CPI print—another decline would cement the cut. A surprise uptick could quickly reprice expectations.