The US inflation reached a three-year low in August increasing hope for the Federal Reserve to lower interest rates in the coming week.
The US consumer inflation declined to 2.5% from 2.9% in July, according to the Labor Department. Core inflation, which excludes volatile food and energy prices, remained relatively stable at an annual rate of 3.2 percent, while monthly inflation increased by 0.2 percent, aligning with expectations.
The Fed‘s preferred inflation gauge, the personal consumption expenditures price index (PCE), has also been moving closer to the bank’s long-term two-percent target in recent months, accompanied by a cooling labor market.
Fed policymakers, given these circumstances, have shifted their focus from inflation to unemployment, signaling that rate cuts are imminent. “
The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks,” Fed chair Jerome Powell said last month.
Additionally, the Fed’s anticipated rate cut next week will place the central bank at the center of the political debate, less than two months before the November presidential election, where the economy remains a crucial issue for voters. As the Fed’s rate decision approaches, investors will closely monitor the announcement on September 18.
According to data from CME Group, futures traders are confident that the Fed will cut rates next week, but the magnitude of the cut remains uncertain. They assign an approximately 85 percent probability to a quarter percentage-point cut and a 15 percent chance of a more aggressive half-point reduction.
Although policymakers have emphasized that the timing of rate cuts will be based on economic data rather than political factors, a September cut could potentially irritate the Republican candidate and former US president Donald Trump, who has previously suggested, without evidence, that Jerome Powell, whom he initially nominated to lead the Fed, was showing political favoritism towards the Democratic party.
The US consumer inflation declined to 2.5% from 2.9% in July, according to the Labor Department. Core inflation, which excludes volatile food and energy prices, remained relatively stable at an annual rate of 3.2 percent, while monthly inflation increased by 0.2 percent, aligning with expectations.
The Fed‘s preferred inflation gauge, the personal consumption expenditures price index (PCE), has also been moving closer to the bank’s long-term two-percent target in recent months, accompanied by a cooling labor market.
Fed policymakers, given these circumstances, have shifted their focus from inflation to unemployment, signaling that rate cuts are imminent. “
The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks,” Fed chair Jerome Powell said last month.
Additionally, the Fed’s anticipated rate cut next week will place the central bank at the center of the political debate, less than two months before the November presidential election, where the economy remains a crucial issue for voters. As the Fed’s rate decision approaches, investors will closely monitor the announcement on September 18.
According to data from CME Group, futures traders are confident that the Fed will cut rates next week, but the magnitude of the cut remains uncertain. They assign an approximately 85 percent probability to a quarter percentage-point cut and a 15 percent chance of a more aggressive half-point reduction.
Although policymakers have emphasized that the timing of rate cuts will be based on economic data rather than political factors, a September cut could potentially irritate the Republican candidate and former US president Donald Trump, who has previously suggested, without evidence, that Jerome Powell, whom he initially nominated to lead the Fed, was showing political favoritism towards the Democratic party.
#inflation #reaches #3year #Federal #Reserve #prepares #reduce #interest #rates #Times #India
