Fed’s Echo: No Interest Rate Cut Before September as CPI Eases

Fed's Echo: No Interest Rate Cut Before September as CPI Eases

Fed's Echo: No Interest Rate Cut Before September as CPI Eases

The US Bureau of Labor Statistics has announced that the Consumer Price Index (CPI) for April recorded an annual growth rate of 3.4%, in line with market expectations. This data indicates that prices and economic activity have not accelerated further, ending the four consecutive instances of exceeding expectations.
Following the release of the CPI report, market expectations for a Federal Reserve interest rate cut have begun to be reassessed. According to data from FedWatch, the current market probability of a rate cut by the Federal Reserve before July is 32%, while the probability before September is as high as 73.8%. This positive news has also brought upward momentum to the US stock market and cryptocurrencies.
However, Nick Timiraos, a Wall Street Journal journalist known as the Federal Reserve’s megaphone, pointed out in the latest report that the April CPI report itself is not sufficient to change expectations regarding whether and when the Federal Reserve will begin cutting interest rates. Nick Timiraos further stated that the significance of the April CPI data lies in preserving the possibility of rate cuts this year and alleviating concerns that the Federal Reserve may need to reopen the “door of rate hikes.”
Nick Timiraos predicts that Federal Reserve officials may need two additional CPI reports to strengthen their confidence in “inflation returning to lower levels before the COVID-19 pandemic.” Therefore, the Federal Reserve may not cut interest rates before September.