JPMorgan, Macquarie join September U.S. rate-cut bandwagon
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JPMORGAN, MACQUARIE JOIN SEPTEMBER U.S. RATE-CUT BANDWAGON
Economists at JPMorgan and Macquarie have advanced their timing of an interest rate cut from the U.S. Federal Reserve to September, after data showed consumer prices eased unexpectedly in June.
The U.S. consumer price index dipped 0.1% last month after being unchanged in May, while annualized rise of 3% was the smallest since June 2023, the Labor Department's Bureau of Labor Statistics said on Thursday.
"While the timing of eventual Fed rate cuts will depend on incoming data, this report, together with some softening in the labor market, has further tilted the balance of evidence towards an earlier start time," said Macquarie economist David Doyle in a note dated July 11.
The inflation figures reinforced views at major brokerages such as Goldman Sachs, UBS Global Wealth Management and Wells Fargo of a September cut as they see a cooling labor market and a slowing economy.
Data showed last week, U.S. employment increased solidly in June, but government and healthcare services hiring made up about three-quarters of the payrolls gain and the unemployment rate hit a 2-1/2-year high of 4.1%, bringing the Fed closer to lowering rates in September.
Fed Chair Jerome Powell on Wednesday pushed back on a suggestion that a September rate cut could be seen as a political act ahead of November elections and clarified the central bank would make interest rate decisions "when and as" they are needed.
JPMorgan expects the Fed to reduce rates at a quarterly pace following the first cut while Macquarie expects two cuts of 25 bps each this year. Macquarie previously expected the Fed to start cutting rates in December while JPM previously held a November forecast.
Markets are fully pricing at least two quarter-point moves by the Fed by the end of the year, LSEG data shows, with the first 25 bp cut priced by September.
The inflation report "supports our view that normalizing the funds rate is becoming reasonable," Goldman Sachs' strategists said in a note.
(Kanchana Chakravarty)
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