Markets double down on September Fed cut after July inflation data

The consumer price index (CPI) reported on Tuesday stated that inflation had achieved 0.2 % in July, and this decreased compared to an increase of 0.3 % in June. Over the past 12 months, this is raised by the main inflation rate of 2.7 % – it is still comfortable before the Federal Reserve goal by 2 % but the same level it was in June.

The Bls Statistics Office (BLS) said that the shelter was the main factor of total height. Meanwhile, the main categories such as the dining indicator have not changed significantly, as food at home decreased by 0.1 % and food away from home by 0.3 %. Elsewhere, the power index decreased by 1.1 % while gasoline costs were reduced by 2.2 %.

Trump supporters 2.0 will use the relatively flat report as a reunion to urge the US Federal Reserve, Jerome Powell, to reduce the basic interest rate, on the pretext that the customs tariff is not (yet) proves that many economists are previously afraid.

In fact, president Trump wrote about social moments in fact after the launch of the data: “Jerome” is very late “that must be reduced now.

When the White House announced the customs tariff system, especially after the “Liberation Day” ads in April, analysts and investors feared that large added costs to world trade will be transferred to American consumers. Investigative studies indicate that this is the intention of the majority of companies: the transfer of increasing fees to the public, thus increasing inflation.

But with different agreements with the main partners who are now taking place, delaying the likes of China to boot, economists have now begun to ask when (or if) will feel the end of the sharp tariff agenda.

The report may have reduced some friction members in the Federal Open Market Committee (FOMC) who were preparing for themselves. For several months, FOMC warned that its two sides were made about decisions on the basic price.

These two aspects increase employment and maintain inflation to 2 %. With a terrible and negative update in the labor market since this month, the growing inflation report for the month of July had put these two factors in greater possibilities.

As, many analysts see the inflation report as another sign in the box to reduce at the next FOMC meeting in September. After all, they think this means that Powell and FOMC can breathe easier about customs tariffs and give the economy and the employment market a boost by reducing attention.

Certainly, investors in the opening bell seem to believe this: the S&P 500 index increased by 0.65 %, as Dow Jones increased by 0.6 %, and Nasdak increased by 0.76 %.

However, while the main inflation remained less than 3 %, the basic inflation increased (with the exception of the volatile food and energy categories) to 3.1 % over the past 12 months.

Sima Shah, chief international strategy in the management of the main assets, wrote in a note seen by luck Inflation data in July is not hot enough “to remove the Federal Reserve from lowering prices in September.

But Shah added that the additional cuts in 2025 are not an expected conclusion: “Attention to the Federal Reserve is that with the decrease in stock, the enhancement caused by inflation will grow in the coming months, which means that inflationary pressures are likely to be less in October, through the discounts in October, as inflation in October may be in October.”

Do not calculate your discounts

While Powell was strengthening criticism from the White House, analysts warn of bread in other and important discounts for the rest of the year.

FOMC held its next meeting in September, followed by two others in October and December, and one member, Michelle Bowman, confirmed that it will be open to such a path.

In fact, Us Hoffman-Portrade from UBS, CIO America and International shares manager, wrote in a memorandum of customers: “With general inflation most likely amid a slowdown economy, our basic issue remains that the price of the Federal Reserve Prices at the September meeting and continue to reduce a total of 100 bits per second.”

In fact, CME’s Fedwatch offers more than 94 % of the market expected to be reduced at the next meeting.

But analysts warned that they are excessively confident after the next meeting. Ellis Osinbo, head of the investment strategy at JP Morgan Wealth Manegement, wrote in a memorandum to customers that while she was still expecting a 0.5 % reduction at the end of the year, “It seems fair to say that the federal reserve can think about moving somewhat from then, but I don’t think there is what distinguishes it in this meeting. A quarter.”

Michael Pears, Vice President of US Economists in Oxford, wrote the economy in a note luck The details of the consumer price index report do not guarantee until the September reduction.

“The largest rise in the basic prices in July provides mixed evidence about the tariff boost on inflation. For the federal reserve, inflation is beyond its goal from the unemployment rate, which is why we expect them to start from prices to a few months.” The basic inflation rose to 3.0 % in July, and we expect to rise to its peak by 3.8 % by the end of the year where it bleeds. Customs tariffs to consumer prices.

“From our point of view, the upper risk of inflation will keep the majority of FOMC preferring to sit on the margin for another a few months. The large reviews listed in the employment report in July have increased concerns about the labor market, and another weak report in August can turn the possibilities in favor of reducing the September rate.”

Bellis Bill Adams, chief economist at Komerica Bank, said that the federal reserve is less likely to reduce because inflationary factors in the July report came from adhesive service prices instead of tariff goods. Adams said: “The job data to be released in early September will have more impact on the following Federal Reserve decision from this inflation report,” Adams said.