NEW DELHI– Softer labor market data and August consumer price inflation have all but locked in a 25-basis-point interest rate cut by the U.S. Federal Reserve at its policy meeting next week, according to analysts.
A report from Emkay Global Financial Services said traders now view a quarter-point cut as “certain” and are pricing in as many as three cuts in 2025. Headline CPI rose 0.4 percent month-over-month in August, above estimates of 0.3 percent, while year-over-year inflation came in at 2.9 percent. Core CPI rose 0.3 percent from July and 3.1 percent annually, broadly in line with forecasts.
“August’s CPI data confirms that while inflation may not be getting worse, it is not getting a lot better either,” said Madhavi Arora, chief economist at Emkay. She added that weakening job figures will push the Fed to shift its focus to the employment side of its dual mandate and begin an easing cycle.
The breakdown of CPI showed core goods inflation up 0.3 percent, led by a 1 percent increase in used car prices and higher apparel and recreational costs. Services inflation eased to 0.3 percent, while shelter costs rose 0.4 percent, lodging climbed 2.3 percent, and airfares surged 6 percent.
Markets responded positively to the data and policy expectations. Treasury yields fell, the dollar weakened slightly, and equities rallied. The Dow Jones Industrial Average rose 1.36 percent, the Nasdaq gained 0.72 percent, and the S&P 500 advanced 0.85 percent.
Moody’s chief economist Mark Zandi, among the early forecasters of the 2008 financial crisis, has warned that state-level data suggest the U.S. is on the verge of a recession. He cited weakening trends in consumer spending, jobs, and manufacturing, alongside concerns about tariffs weighing on corporate profits and persistent strains in the housing market.
The Fed’s decision next week is expected to set the tone for U.S. markets heading into the fourth quarter, with investors watching closely for signals on the pace and scale of rate cuts through 2025. (Source: IANS)
