Inflation Resurgence Derails Fed Easing Cycle, Bonds Rally Despite Rate Cut Delays

January PPI data showed persistent inflationary pressures, particularly in services, with core PCE expected to rise to 3.2% by March from 3%. This reverses Fed progress toward 2% targets despite 175 basis points of cuts since September 2024. Markets responded with equity selloffs but paradoxically drove 10-year Treasury yields below 4% as investors fled to safety, generating bonds' best monthly performance in a year.