Inflation is once again a key focus for financial markets, as it could determine the next move by the Federal Reserve on interest rates. Previously, job market data was the main factor, but now, all eyes are on the upcoming inflation report for August.
Consumer Price Index (CPI) Data: A Potential Game-Changer
This Wednesday’s Consumer Price Index (CPI) data might be the tipping point for whether the Fed decides on a larger-than-usual rate cut of 50 basis points on September 18. The last time the Fed cut rates by that much was during the 2008 financial crisis.
Market Speculation: The Impact of Lower-than-Expected Inflation
Investors are now wondering if lower-than-expected inflation on Wednesday could signal a half-percentage-point rate cut—and whether that’s good or bad news. The latest job report showed fewer jobs added than anticipated, which further complicates predictions about the Fed’s next move.
Economists at Wells Fargo suggest that while a 50-basis-point cut is likely, a smaller 25-basis-point reduction is still a possibility.
Stock Market Reaction: Concerns of an Economic Slowdown
Adding to the uncertainty, concerns about a potential economic slowdown caused U.S. stocks to drop sharply last Friday, leading to the worst start to September for the Dow, S&P 500, and Nasdaq in over a decade.
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