The U.S. import price index fell to 0% year over year in December. In the previous reading, it was 0.1% year over year.
This means import prices were flat compared with a year earlier. The latest figure is a small decline from the prior month’s annual pace.
Implications For Fed Policy
The December 2025 import price data, showing 0% inflation year over year, suggests global disinflation is spilling into the U.S. economy. This gives the Federal Reserve more room to ease its hawkish tone from last year. Bond markets are already reflecting this shift, with higher odds of rate cuts later this year.
This view was reinforced by the January 2026 Consumer Price Index report released last week. It showed core inflation falling to 2.8%, the lowest level since early 2023. As a result, Fed funds futures now price in a greater than 60% chance of at least one rate cut by the July 2026 meeting. That is a major shift from the more cautious outlook in late 2025.
Given this, it may make sense to look at trades that can benefit if rates fall. One approach is buying call options on long-term Treasury bond futures (ZB) or related ETFs. This can profit if bond prices rise as markets gain confidence that the Fed’s 2024–2025 rate-hiking cycle is over.
For equities, lower rates often support growth and technology stocks, which were pressured by higher rates through much of 2025. A bullish call spread on the Nasdaq 100 can capture potential upside with defined risk. Lower borrowing costs can help lift valuations for these rate-sensitive companies.
That said, the advance estimate for Q4 2025 GDP was a softer-than-expected 1.5%. This suggests lower inflation may also reflect slower growth. That uncertainty has pushed the VIX into the upper teens. To trade potential volatility around the next Fed meeting in March, straddles on the S&P 500 are one option. We may also see a weaker U.S. dollar, which could be expressed by buying put options on dollar-tracking funds.
Managing Growth And Volatility Risk
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