“August CPI release crucial for Fed policy and markets. Inflation trend and labor market concerns shape expectations. S&P 500 up 15.2% YTD, investors watchful.”, — write: www.fxempire.com
Fed Policy Implications The Federal Reserve’s upcoming meeting on September 17-18 has markets on edge, with traders currently pricing in a 70% probability of a 25 basis point rate cut, according to the CME’s FedWatch Tool. However, the August CPI data could potentially shift these expectations.
Chris Diaz, portfolio manager at Brown Advisory, told Morningstar, “I don’t know why they wouldn’t go 50 [basis points],” highlighting the ongoing debate in the market regarding the size of the potential rate cut.
Market Reaction and Economic Indicators While inflation remains above the Fed’s 2% target, CNBC reports that the focus has shifted somewhat from inflation to labor market concerns. Recent jobs data has shown a slowdown in hiring, potentially influencing the Fed’s decision-making process.
Dean Baker, co-founder of the Center for Economic and Policy Research, noted, “Barring some extraordinary surprises, there should be nothing in this report that would deter the Fed from making a rate cut and quite possibly a large one.”