Fed Chairman Powell May Signal September Rate Cut Based on Next Week's Inflation Data - Jefferies
According to a note from Jefferies, next week's CPI data could lead Fed Chairman Jerome Powell to hint at a rate cut in September, following recent economic indicators that have prompted the Fed to consider easing monetary policy.
Economists anticipate a 0.2% increase in the Consumer Price Index for June, compared to 0% in the previous month, with core CPI expected to remain steady at 0.2%. This potential slowdown in inflation would further support the idea that the strong results seen in Q1 were an anomaly in the overall deflationary trend.
The likelihood of a rate cut in September received a boost after Friday's job report revealed downward revisions in job gains for April and May, along with an unexpected rise in the unemployment rate in June. These factors, along with slowing wage growth, suggest a weakening labor market.
Market indicators show a 70% chance of a rate cut in September, up from 60% the previous week, as economic data continues to support the case for easing monetary policy. Fed officials have hinted at the need for more confidence before considering a rate cut, but the upcoming events such as Powell's testimony before Congress and the July Fed meeting could provide the necessary momentum for a policy shift.
Powell's testimony before Congress on Tuesday will be closely watched for any indications of future rate cuts. Stay tuned for more updates on the Fed's monetary policy decisions and their potential impact on the financial markets.