NEW DELHI– Softer labor market numbers combined with August’s inflation data have all but guaranteed a Federal Reserve rate cut at next week’s policy meeting, according to a report released Friday.
Emkay Global Financial Services said traders are pricing in a 25-basis-point reduction at the upcoming Federal Open Market Committee (FOMC) meeting, with expectations of roughly three cuts over the course of 2025.
Headline consumer price index (CPI) inflation rose 0.4 percent month-over-month in August, above the forecast of 0.3 percent, bringing the year-over-year increase to 2.9 percent. Core CPI — which strips out food and energy — rose 0.3 percent from July and 3.1 percent annually, in line with expectations.
“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 noted that weak employment figures are forcing the Fed to shift focus to its jobs mandate and begin easing.
The report flagged rising costs in several categories: core goods inflation jumped 0.3 percent, led by a 1 percent increase in used car prices along with higher apparel and recreation costs. Shelter costs rose 0.4 percent, lodging surged 2.3 percent, and airfares climbed 6 percent. Services inflation eased to 0.3 percent for the month.
Markets welcomed the data, with Treasury yields edging lower and the dollar weakening slightly. On Wall Street, the Dow Jones Industrial Average gained 1.36 percent, the Nasdaq rose 0.72 percent, and the S&P 500 advanced 0.85 percent.
Adding to the concerns, Moody’s Chief Economist Mark Zandi — who predicted the 2008 financial crisis — recently warned that the U.S. may be on the verge of recession. He cited state-level data showing slowing consumer spending, weakening job creation, and softening manufacturing, along with tariffs cutting into corporate profits and persistent strains in the housing market.
The Fed’s decision next week is widely seen as the start of a new easing cycle aimed at cushioning the economy from mounting risks. (Source: IANS)
