The CBOE Volatility Index (VIX) experienced a sharp decline as recent data revealed a slowdown in core inflation, fueling expectations for potential Federal Reserve rate cuts. The core consumer price index's modest 0.2% increase for December has alleviated fears of aggressive monetary tightening, prompting a rally in US equities and a drop in Treasury yields. This shift in sentiment has been further bolstered by a weakened dollar, which has increased demand for equities and speculative assets. The market's positive reaction to the inflation data suggests a broader anticipation of a more accommodative monetary policy environment, as highlighted by analysts who note the relief over the inflation figures.
The ProShares Short VIX Short Term Futures ETF (SVXY) rose 3.86% to $50.90 as of 18:00 on Wednesday, January 15.