According to the latest data from the CME FedWatch tool, the probability of the Federal Reserve cutting interest rates in September stands at 100%. Chicago Fed President Austan Goolsbee spoke to Yahoo Finance this morning, who commented that inflation is making its way down to the Fed’s target goal of 2%.
Wolfe Research chief economist Stephanie Roth joins Catalysts to talk about the probability of a rate cut, Goolsbee’s comments, and the Fed’s approach to balancing rates with the US labor market.
“If you take a step back and look at the Fed speakers over the past week and a half or so since the last CPI print, the message has been very consistent among Fed speakers. It’s been a message where inflation is coming back down closer towards their target. They’re on the golden path, which is how exactly how he described it, and the last two to three prints have been kind of consistent with that. They’re emphasizing perhaps even a little bit more of the employment side of the mandate versus the inflation side…”
Wolfe believes rate cuts in September and December are the “base case” at the moment, “and then we’re looking for a quarterly cutting cycle from there, bringing rates back down to about 3.25% to 3.5%. So we think it’ll be a very gradual easing cycle…”
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