Optimism for Interest Rate Cuts as Inflation Trends Downward

Recent data on consumer prices suggests that inflation is easing, with the annual Consumer Price Index (CPI) slowing to 2.9% last month – the lowest since March 2021. The monthly increase in consumer prices was a modest 0.2%, primarily driven by rising housing costs, which contributed to nearly 90% of this increase.

Despite a general slowdown, certain items like eggs saw a significant jump, increasing by 5.5% from June to July. On the other hand, apparel such as men’s suits and sport coats dropped by about 4%.

This cooling inflation reignited expectations among traders that the Federal Reserve might begin to lower interest rates starting in September. Recent uptick in unemployment and a softening labor market further shape the market sentiment, reinforcing the case for a rate cut.

Current market odds favor a 25 basis-point cut next month, though there is still speculation about a possible double cut of 50 basis points.

For more detailed information, check out the full article available on Sherwood News.