Data released by the U.S. Bureau of Labor Statistics last night showed that the U.S. CPI increased by 3.4% year-on-year in April, in line with market expectations. It was the first time since January this year that the annual growth slowed down. The core CPI annual growth rate excluding food and energy costs It even fell back to 3.6%, the smallest increase since April 2021, rekindling hopes that the Federal Reserve will cut interest rates, and US stocks and Bitcoin rose simultaneously.
According to interest rate futures market data from CME Group (CME) Fedwatch, current market estimates are:
- The chance that the Fed will keep interest rates unchanged in June is 97.3%, and the chance of cutting interest rates by one point is only 2.7%
- The probability of keeping the current interest rate unchanged in September is 67.1%, and the probability of cutting interest rates by one point is 32%.
- The probability of keeping the current interest rate unchanged in September is only 25.5%, and the probability of cutting interest rates by one yard is 53.8%.
After the CPI data was released, Wall Street investment banks said that the data opened the door for the Federal Reserve to cut interest rates. Even if the optimistic April inflation data does not allow the Federal Reserve to cut interest rates in July, it is enough for the Federal Reserve to start cutting interest rates in September. , the following is the first reaction of Wall Street investment banks.
What does Wall Street think?
JPMorgan Chase said that April's CPI data gave people a sigh of relief, showing that inflation is returning to the downward track. JPMorgan Chase still maintains the view that the Federal Reserve will cut interest rates for the first time in July, but it may need to see further improvement in labor market activity. This can only be achieved by cooling down.
Goldman Sachs said that based on the latest PPI and CPI data, it still expects the Producer Price Index (PPI) to rise 0.25% in April, and continues to expect the Federal Reserve to cut interest rates by 25 basis points in July and continue to cut interest rates on a quarterly basis thereafter.
Morgan Stanley said that compared with the first quarter of this year, CPI data has slowed down. This is the first month of this year. There is compelling evidence that the Federal Reserve needs to start cutting interest rates as soon as possible. Morgan Stanley still expects future inflation. It will slow down even more, especially in the second half of 2024, and the Federal Reserve is expected to cut interest rates for the first time in September this year.
Wells Fargo said the Fed will need at least a few more mild inflation data before it will be confident enough to start cutting interest rates. Wells Fargo expects the Fed to cut interest rates for the first time in September, but if there are any new bumps in the road , may delay the timing of interest rate cuts.
Wolfe Research believes that the Federal Reserve's hawkish stance has reached its peak, and it expects that recent inflation and economic growth data will weaken, which will give the Federal Open Market Committee (FOMC) reason to cut interest rates in September and December.
RBC Capital Markets said that the U.S. CPI data in April gave some relief, but it is not yet worthy of celebration. Although price pressures have slowed slightly, they are still generally rising, and core indicators remain at high levels. It is expected that The Fed will remain on the sidelines for most of the year before choosing to cut interest rates for the first time in December, but this will depend on whether CPI data continues to decline in the meantime.
