The United States import price index fell to 0% year on year in December. It was 0.1% year on year in the previous reading.
This shows import prices were unchanged compared with a year earlier. The latest figure marks a small drop from the prior month’s annual rate.
Implications For Fed Policy
The December 2025 import price data showing zero inflation year-over-year confirms that global disinflationary pressures are directly impacting the U.S. economy. This gives the Federal Reserve significant justification to soften its hawkish stance from last year. We are seeing this view reflected in the bond market, which is now pricing in a higher probability of rate cuts later this year.
This trend was further supported by the January 2026 Consumer Price Index report released last week, which showed core inflation dipping to 2.8%, its lowest level since we looked at the data back in early 2023. As a result, Fed fund futures are now indicating a greater than 60% probability of at least one rate cut by the July 2026 meeting. This is a sharp reversal from the cautious sentiment we held in the final quarter of 2025.
In response, we should consider trades that benefit from falling interest rates. Buying call options on long-term Treasury bond futures (ZB) or related ETFs provides direct exposure to this theme. This strategy profits if bond prices rise as the market becomes more certain that the Fed’s aggressive rate-hiking cycle of 2024-2025 is truly finished.
For equities, this environment favors growth and technology stocks, which were held back by high rates throughout much of 2025. We could use bullish call spreads on the Nasdaq 100 to capture potential upside in a risk-defined manner. Lower borrowing costs should boost valuations for these rate-sensitive companies.
However, the recent advance estimate for Q4 2025 GDP came in at a softer-than-expected 1.5%, suggesting this cooling inflation may be linked to a slowing economy. This uncertainty has pushed the VIX into the upper teens, and we could use straddles on the S&P 500 to trade the expected volatility around the next Fed meeting in March. We can also anticipate U.S. dollar weakness by purchasing put options on dollar-tracking funds.
