The U.S. Department of Labor released the Consumer Price Index (CPI) that has attracted much market attention last night (14th). The report shows:
- The U.S. CPI increased by 0.2% in July, higher than the 0.1% monthly decrease in June, but in line with market expectations; the annual growth rate dropped to 2.9%, lower than the 3% increase in June and market expectations. This was the fourth consecutive increase. The temperature dropped last month and hit the lowest level since March 2021.
- Excluding volatile food and energy prices, core CPI increased by 0.2% in July, slightly higher than June's 0.1%, but still in line with market expectations; the annual growth rate dropped to 3.2%, a more than three-year low.
CPI data that has cooled for three consecutive months shows that US inflation continues to be under control. Wall Street reporter Nick Timiraos believes that the Fed's interest rate cut in September is a certainty.
JPMorgan: The extent of interest rate cut in September depends on the next non-farm payrolls data
JPMorgan Chase also said that the CPI data gave the Federal Open Market Committee (FOMC) the green light to cut interest rates in September (the meeting will be held on September 18 and 19).
According to ForexLive , JPMorgan Chase believes that the Federal Reserve may cut interest rates by 50 basis points or 25 basis points. The key factor that will prompt the Federal Reserve to cut interest rates by 50 basis points is the rebound in the August non-farm payrolls report:
If nonfarm payrolls fall between 160,000 and 200,000, it could alleviate many of the concerns raised by the July jobs report. However, if non-farm employment growth only approaches 100,000 or so, there will be concerns about an economic recession, which may lead to a larger interest rate cut.
Nick Timiraos also said that the Fed's interest rate cut in September depends on the labor market report. He said:
The CPI data has not resolved the debate over whether to cut interest rates by 25 basis points or 50 basis points. Instead, the final outcome may also depend on labor market reports, including jobless claims and non-farm payrolls reports.
Similarly, Lindsay Rosner, head of fixed income at Goldman Sachs Asset Management, said that the latest CPI data paves the way for a 25 basis point interest rate cut in September, but given that more economic data will be released later, a 50 basis point interest rate cut is still possible. exist.
As the U.S. economy gradually slows down, the overall trend of inflation declines, and the job market weakens, the market generally expects that the Federal Reserve will start to cut interest rates next month, and the extent of the interest rate cut will depend on more upcoming data. Among them, August The non-farm payrolls data will be released on September 6th.
Chances of a 2-digit interest rate cut in September decrease
According to the CME Group's FedWatch Tool , the probability of the Fed cutting interest rates by 2 percentage points to 4.75% to 5% in September is 37.5%, which is down from the 49.5% reported two days ago. % to 5.25%, the probability rose to 62.5%, and the possibility of no interest rate cut was ruled out.
In addition, the probability that the Fed will cut interest rates by 2 percentage points cumulatively by November is 43.5%, the probability of cumulative interest rate cuts by 3 percentage points is 45.1%, and the probability of cumulative interest rate cuts by 4 percentage points is 11.4%.
