Keep knowledgeable with free updatesSimply signal as much as the US rates of interest myFT Digest — delivered on to your inbox.Buyers have fallen into line with the Federal Reserve’s expectation that it’ll lower rates of interest simply 3 times this yr, after a months-long stand-off between markets and the central financial institution.Following a run of financial knowledge signalling that US inflation is stubbornly excessive, merchants have been on Friday pricing in solely three quarter-point price cuts by the tip of the yr, in keeping with knowledge compiled by LSEG. Earlier than Tuesday’s surprising rise in US inflation, traders had anticipated nearly a full proportion level of cuts by December. In January, they’d guess on between six and 7 quarter-point cuts by the tip of 2024. “The market has been delivered to heel,” mentioned Padhraic Garvey, head of analysis for the Americas at ING, arguing that the persistence of inflation had compelled traders to again down.US shares opened decrease on Friday as merchants trimmed their bets on rate of interest cuts, with the benchmark S&P 500 falling 0.4 per cent shortly after the opening bell and the tech-heavy Nasdaq Composite down 0.7 per cent.The markets’ alignment with the Fed’s forecast of three cuts from charges’ present 23-year excessive marks an enormous shift as traders alter to inflation’s slower than anticipated fall in an important US election yr.Markets now put the possibility of an rate of interest lower by June at only one in three. Final month they gave a 100 per cent chance to a discount by June from the current degree of 5.25 per cent to five.5 per cent.“It’s trying more and more seemingly that we’ll find yourself with a brief and shallow price slicing cycle this time round,” mentioned Mark Dowding, chief funding officer at RBC BlueBay Asset Administration, who argued that the Fed should have to maintain charges comparatively excessive to beat again inflation. In addition to February’s surprising enhance in inflation to three.2 per cent, separate knowledge this week confirmed a 0.6 per cent month-on-month surge in producer costs.The Fed will meet subsequent week to debate the course of future price cuts and can replace its projections for the remainder of the yr. It’s anticipated to maintain charges on maintain at subsequent week’s assembly.Fed chair Jay Powell mentioned this month the central financial institution was “ready to grow to be extra assured that inflation is shifting sustainably to 2 per cent” earlier than slicing borrowing prices.“There’s nonetheless the very actual danger that the strong financial knowledge prevents the Fed from slicing rates of interest within the coming months,” mentioned Ellie Henderson, an economist at Investec. The yield on two-year Treasuries, which tracks rate of interest expectations, has risen this week by 0.24 proportion factors to 4.72 per cent.Official knowledge final week confirmed the US had created extra jobs than anticipated in February. Whereas the unemployment price rose to three.9 per cent from 3.7 per cent the month earlier than, it stays low by historic requirements. Oil costs additionally climbed to their highest degree since November on Thursday, which may contribute to inflation staying above the Fed’s 2 per cent goal for longer.Extra reporting by Stephanie Stacey