US inflation rose to 2.9% in December.

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U.S. inflation rose to 2.9 percent in December, in line with expectations, prompting investors to increase bets on rate cuts this year.

Wednesday’s Bureau of Labor Statistics data was in line with the forecast of economists polled by Reuters and was above November’s 2.7 percent.

Core inflation, which includes food and energy prices, was 3.2 percent in December compared with 3.3 percent in November.

U.S. stock futures and government bonds immediately rallied as the dollar fell after the release of the latest inflation data. Contracts tracking the S&P 500 equity benchmark rose 1.5 percent, while those tracking the tech-heavy Nasdaq 100 rose 1.8 percent.

In government bond markets, the policy-cautious two-year Treasury yield fell 0.08 percentage point to 4.29 percent, while the 10-year yield — a measure of global borrowing costs — fell 0.09 percentage point to 4.7 percent. When the price increases, the products fall

The dollar was down 0.5 percent against six other currencies.

Fed officials said they planned to take a “cautious approach” to rate cuts amid growing concerns that inflation may not fall quickly enough to the central bank’s 2 percent target.

Investors are now betting the Fed will cut rates by July, compared to September before the data was published.

Futures markets now indicate a 60 percent chance of a second rate cut this year, up from 20 percent earlier Wednesday.

Most investors and analysts believe the Fed will not cut rates at its next policy meeting later this month. US central banks have indicated in their own forecasts that they will cut rates by another 50 basis points this year.

President-elect Donald Trump took office on Monday with tough plans to impose tariffs on mass imports, crack down on illegal immigrants and enact sweeping tax cuts.

Economists have warned that such plans may further increase inflation.