CPI Inflation Slows Supporting September Fed Cut

Trusted Insights for What’s Ahead^®

• Today’s CPI inflation data support the Fed’s strong signaling that interest rate cuts will commence at the September 17-18 meeting.
• Other incoming data have been positive on net: real consumer spending was 3 percent annualized higher in July compared to Q2 2024, indicating a strong start to Q3 real GDP growth; while nonfarm payrolls gains were positive in August and the unemployment rate remains low at 4.2 percent.
• Collectively, inflation, labor market, and growth data suggest that the US economy remains healthy and likely not in a recession, hence the Fed can cut by 25bp next week.
• Indeed, interest rate cuts exceeding a quarter percentage point at the September meeting would indicate deeper concerns about the US economy, and/or fears of an impending recession, which is not The Conference Board base case.

Figure 1. Total CPI Inflat