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CME traders say chances of April interest rate hike are zero

While the chances had been low, traders now believe there is absolutely no possibility of a Fed rate hike in April.

The probability went to zero Thursday morning after two days' worth of data showed that the economy is still well shy of the central bank's inflation target. The reading comes from the CME's FedWatch tool, which tracks the price of monthly fed fund futures contracts then uses a formula to determine the chances the market is assigning to a Fed move. The current April futures contract implies a funds rate of 0.36 percent, which is actually one basis point below the current level.

Inflation is central to the Fed's thinking and has been elusive even as the economy nears full employment.

Core consumer price index data Thursday indicated just a 0.1 percent monthly growth, with a similar reading excluding volatile food and energy prices. The producer prices index, released Wednesday, also showed a gain of just 0.1 percent.

Taken together, the numbers would translate into an annualized gain of 1.51 percent in the personal consumption expenditures index, according to calculations from Bank of America Merrill Lynch.

Fed officials have been trying to normalize policy but have faced various roadblocks along the way. The Federal Open Market Committee approved a quarter-point hike in December and at that time indicated that four moves were likely in 2016.

However, lackluster inflation coupled with flat gross domestic product growth, a strong contraction in corporate earnings and global slowness have stayed the Fed's hand. The most recent "dot plot" projections from FOMC members indicate two hikes this year.

However, the latest indication from the CME is that no rate hike is coming until at least December, which has a 59 percent chance.