The United States Import Price Index rose by 0.1% month on month in December. This was below the forecast of 0.2%.
The data suggests import prices increased at a slower pace than expected for the month. No further breakdown was provided in the release.
Import Prices Signal Cooling Inflation
Looking back at the data from December 2025, we saw the U.S. import price index rise by only 0.1%, which was softer than the 0.2% that was expected. This signaled to us that imported inflation was cooling more than anticipated as we closed out last year. This single piece of data supports the view that overall price pressures in the economy are easing.
This disinflationary trend has been supported by more recent data from January 2026, where the latest CPI report showed core inflation slowing to a 2.8% annual rate, the lowest since early 2023. As a result, we see Fed funds futures now pricing in a 70% probability of a rate cut by the Federal Reserve’s July meeting. This has led us to look at call options on interest rate futures, which would profit if rates do indeed fall in the coming months.
In the equity markets, this outlook favors index-related strategies, as lower interest rates tend to boost stock valuations. We are positioning for this by buying call options on the S&P 500 with expirations in the second quarter. This is similar to the pattern we observed in late 2023 when early signs of a Fed pivot led to a substantial market rally.
A less aggressive Federal Reserve is also likely to put downward pressure on the U.S. dollar. The Dollar Index (DXY) has already fallen by 1.5% since the start of this month. We believe this trend will continue, making it sensible to consider trades that benefit from a weaker dollar, such as buying call options on the euro or Japanese yen.
