US inflation rules out jumbo Fed cut, Fed to strike dovish note at meeting
|The dollar is trading a touch stronger this afternoon as the August US inflation report appears to have effectively ruled out the possibility of a jumbo interest rate cut from the Federal Reserve this month. While the main inflation measure came in moderately weaker than estimates, and fell to its lowest level since February 2021, the core inflation rate remained stuck at July levels. There was also a larger-than-expected 0.3% jump in monthly core inflation, which marks the fastest pick-up in underlying consumer prices in four months.
We don’t think that today’s data will be enough to force the FOMC to deliver a 50 basis point rate cut at its meeting next week, which is now only around 15% priced in by markets.
We do, however, think that the Fed will strike a dovish note in its communications following the September meeting, indicating to markets that the cooling in the US labour market has accelerated, and that an aggressive pace of cuts may be required in order to support it.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.