All Signs Point to Fed Rate Cut Come September

Expectation is growing on Wall Street, and not the usual parsing of bits of data and the wishful thinking that follows. The numbers are really looking solid—rate cuts may be coming soon. US inflation cooled broadly in June to the slowest pace since 2021 on the back of a long-awaited slowdown in housing costs. The so-called core consumer price index (which excludes food and energy costs) climbed 0.1% from May, the smallest advance in three years. The overall measure fell for the first time since the onset of the pandemic, dragged down by cheaper gasoline.

With Federal Reserve Chair Jerome Powell expressing optimism that the uptick in inflation earlier this year was just a speed bump, the June reading will likely go a long way toward giving him and his colleagues the confidence they need to cut rates, likely starting in September. Policymakers will have a chance to signal such a move when they meet later this month, especially since unemployment has now risen for three straight months. “We are sufficiently confident—even if the Fed is not yet ready to admit they are—that inflation is on the way back to the 2% target,” Joseph Brusuelas, chief economist at RSM US, said in a note. “The road is now open to a rate cut.”