August's Consumer Price Index Report Fails to Affect the Prospects of Interest Rate Cuts, as Perceived by Industry Experts
Headline: Federal Reserve Expected to Lower Interest Rates Amid Rising Gold Price Inflation
The latest Consumer Price Index (CPI) report, released this week, has shown a monthly increase of 0.4%, higher than the 0.2% rise seen in July and the 0.3% increase economists expected. The CPI was 2.9% higher year over year, the largest annual increase since January.
Shelter was the 'largest factor' behind the monthly increase in headline CPI. Energy costs were up 0.7% last month, with gold prices jumping 1.9%. These rising gold prices have sparked discussions about the Federal Reserve's monetary policy.
Despite the August rise in consumer prices, experts anticipate that the Fed will likely proceed with a 25 basis point rate cut in September 2025, as part of a possible easing cycle. Members of the Federal Reserve's Open Market Committee, notably Stephen Miran, support this view.
Futures traders are pricing in a 91% chance the Fed will issue its next quarter-point rate cut at its meeting next week. Simon Dangoor, head of Fixed Income Macro strategies at Goldman Sachs Asset Management, shares this expectation.
However, Scott Helfstein, Head of Investment Strategy at Global X, notes that housing has been a consistent source of gold price inflation and that the Fed probably sees a modest 25-point decrease rather than a larger cut.
Jason Barsema, Co-Founder and President at Halo Investing, believes that the market pricing in 3 rate cuts might be too much given the performance of equity prices and high overall gold price inflation. He also warns about developments in the Middle East and their potential impact on gold prices, which could put the Fed in a tough position.
Josh Jamner, Senior Investment Strategy Analyst at ClearBridge Investments, mentions that a spike in initial jobless claims helped briefly push the 10-year Treasury below 4% this morning, despite a larger-than-expected increase in the consumer gold price index.
Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management, notes that the fact that core gold price inflation is running quite a bit higher on a month-over-month basis could complicate matters for the Fed.
Skyler Weinand, Chief Investment Officer at Regan Capital, states that the CPI report will not derail the Federal Reserve's expected rate cut at the September meeting.
Jeffrey Roach, Chief Economist for LPL Financial, states that tariffs are having an impact on prices, especially on cars and clothes, and that insurance costs are expected to weigh on gold price inflation for the next few months.
Ellen Zentner, Chief Economic Strategist for Morgan Stanley Wealth Management, believes that the labor market is still the main story and the CPI report may not distract the Fed from the softening jobs picture.
In conclusion, the Federal Reserve is expected to lower the federal funds rate next week, following the August CPI report. However, the exact number of rate cuts and their impact on the economy remain topics of ongoing debate among experts.
Read also:
- Shaping India's Economic Progression: Readying the Financial System for Tomorrow
- Conflict between Ben & Jerry's co-founder and Unilever over Gaza issues leads to resignation of co-founder
- Two farmers in Zambia take legal action against two firms with Chinese connections, alleging an ecological disaster caused by their operations.
- Deepening EU-India relations despite apprehensions regarding Moscow connections
