The CBOE Volatility Index and VIX-linked exchange-traded funds climbed on Thursday as investors dumped risky assets on uncertainty over the Federal Reserve’s response to accelerating inflationary pressures.

Among Thursday’s best performing non-leveraged ETFs, the iPath Series B S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX) increased by 8.6%, and the ProShares VIX Short Term ETF (NYSEArca: VIXY) advanced by 8.4%. Meanwhile, the CBOE Volatility Index climbed 19.4% to 23.8, breaking past its near-term resistance at the 50-day simple moving average.

The Wall Street Journal reports that US markets fell after new price data showed inflation accelerated to an annual rate of 7.5% in January, beating economists’ estimates and the rate of 7% from December. Bond yields also crossed the 2% mark for the first time since 2019.

Updated inflation data threw a wrench in a somewhat stabilizing market. Fund managers have warned that they are bracing for greater volatility as the market waits for the Fed to react to tackle high inflation.

“I expect we will see a return to the volatility that prevailed for most of January following this report,” Brian Price, head of investment management for Commonwealth Financial, told Reuters. Network.

“Investors may want to buckle up as it could be difficult for risky assets until inflationary data starts to ease, and I expect that to happen as it goes. as we progress through the year.”

Traders are betting the Fed will raise interest rates at its March meeting, with money markets indicating a 50% chance of a half-point hike next month, up from a 30% chance before the release inflation data.

“Speculation about the outcome of the next [Fed meeting] will now crack down,” Sandra Holdsworth, UK rates head at Aegon Asset Management, told the WSJ. “With inflation at these levels and still not expected to peak, it’s hard to say whether 25 basis points, 50 basis points or even higher is the correct central bank response.”

For more news, insights and strategy, visit ETF Trends.