Inflation Resurgence Derails Fed Rate Cut Expectations, Triggers Flight to Quality

January PPI data revealed persistent inflationary pressures, particularly in services, pushing core PCE projections to 3.2% by March—well above the Fed's 2% target despite 175 basis points of cuts since September 2024. Markets responded with sharp equity selloffs (Dow -1.44%) while the 10-year Treasury yield fell below 4% as investors fled to bonds, posting their best monthly gains in a year.