Inflation figures released today are in line with expectations, strengthening the case for a Federal Reserve rate cut in September, according to Tom Graff, Chief Investment Officer of Facet.
While overall CPI growth was as predicted, the details suggest a more nuanced picture. The majority of this month’s increase came from housing costs. Because housing carries a slightly lower weighting in the Fed’s preferred inflation metric, the core PCE, this could mean a slightly lower reading for that measure.
This development, Graff argues, solidifies the Fed’s path towards a rate cut next month. However, he cautions against expectations of an aggressive 50 basis point reduction.
“The Fed may well choose to slow down the first rate cut and consider a larger rate cut later,” he suggests.
