New Delhi, Sep 12 United States' CPI inflation in August, along with a sharp downturn in labour market dynamics, rendered a 25 basis point Fed rate cut next week "certain", said a report on Friday.
Traders anticipate a 25-basis-point cut at next week’s FOMC meeting and expect approximately three cuts in total for 2025, a report from Emkay Global Financial Services said.
Headline CPI rose 0.4 per cent month-over-month, exceeding estimates of 0.3 per cent, and increased 2.9 per cent year-over-year. Core CPI increased by 0.3 per cent from July and 3.1 per cent year-over-year, aligning 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, Emkay Global Financial Services.
However, she added that weakening job figures will compel the Fed to turn towards the employment side of its dual mandate and restart its easing cycle next week.
Core goods inflation rose to 0.3 per cent MoM, driven by a 1 per cent rise in used car prices along with higher costs for apparel and recreational items, indicating potential tariff pass-through, the report said.
Services inflation decreased to 0.3 per cent for the month, while shelter costs rose by 0.4 per cent and lodging increased by 2.3 per cent. Airfares increased by 6 per cent, it added.
Markets showed positive movement, with Treasury yields declining and the dollar decreasing slightly. Overnight, the Dow Jones Industrial Average jumped 1.36 per cent, while the Nasdaq advanced by 0.72 per cent and the S&P 500 gained 0.85 per cent.
Chief economist of credit rating agency Moody's, Mark Zandi, who was one of the first economists to foresee the 2008 financial crisis, had earlier said that state-level data indicate that the US is on the verge of a recession.
Based on data on spending, jobs, and manufacturing, he believes the economy is on the verge of a recession, and shared his concerns about US tariffs harming American companies' profits as well as persistent problems in the US housing market.
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