Expect a final inflation test this week before the Federal Reserve meets on September 18. Unless there’s a huge surprise in the Wednesday, August 14, CPI report, the Fed will cut interest rates for the first time at that meeting.
The Federal Reserve Bank of Cleveland’s Nowcast predicts that annual headline inflation will increase at a 3% annual rate in July, which is the same rate observed in June 2024. On a monthly basis, headline or all-items, inflation is forecast to rise by 0.2%, contrasting with the 0.1% decline seen in June.
Core CPI, which excludes more volatile food and energy prices, is expected to increase by 3.3% annually and 0.3% on a monthly basis. June’s CPI report posted a 3.3% annual core inflation rate.
As of Friday, August 9, the CME FedWatch tool put the odds of a September interest rate cut of either 25 or 50 basis points at 100%. Odds of a super 50 basis point cut stood at 48.5%.
