Will Incoming US Inflation Data Derail Outlook For Interest Rate Cut? | Metals Mine

  • Will Incoming US Inflation Data Derail Outlook For Interest Rate Cut?

    From capitalspectator.com

    Markets are all in on predicting that the Federal Reserve will cut interest rates at the next policy meeting on Sep. 17. But there could be a wild card in the deck. A key macro question between now and then: Will the next two updates on consumer inflation persuade the Fed to leave rates unchanged – or perhaps raise rates? At the moment, markets are confident that the central bank will ease policy next month. Let’s start with the US 2-year yield, which is widely viewed as a proxy for rate expectations. The current yield – 3.72% as of Aug. 5 — continues to trade well below the median Fed funds rate (4.33%), a ... (full story)

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Nordling
Aug 6, 2025 12:05pm
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If inflation print suprises to the upside next week, markets will go wild for sure.

A very dovish fed and rate cuts are priced in after the last NFP data. It shook the markets, now an upside surprise on inflation would shake the markets again.

Yeah FED will eventually ease, but a hot inflation report can easily take down one of those 3 rate cut expectations.
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Vancarbon
Aug 6, 2025 12:25pm
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Quoting Nordling
If inflation print suprises to the upside next week, markets will go wild for sure. A very dovish fed and rate cuts are priced in after the last NFP data. It shook the markets, now an upside surprise on inflation would shake the markets again. Yeah FED will eventually ease, but a hot inflation report can easily take down one of those 3 rate cut expectations.
Certainly agree that a lot ( if not all cuts ) are priced in , hence I see a range trading market until the picture is clearer . Inflation will be secondary for now imo , I personally don’t like the risk/ reward ratio for further upside potential on the US indices .

Furthermore, I certainly envisage a knock to Corporate profitability looking at PE ratios at this level, particularly so with what ( potentially) lies ahead .
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Nordling
Aug 6, 2025 12:19pm — Edited
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Quoting Trader#B9E5
Tariffs are a one and only one time increase in prices. The Fed was perfectly fine to do nothing about the 50% increase in prices from Covid. Yet everyone now thinks a 10% or so one time price hike is going to force the Fed to keep interest rates way too high? The Fed cares about sustained inflation, as in inflation on top of inflation, not one time price adjustments. After the jobs data they will cut at least twice, and keep cutting if jobs numbers don’t turn around. Very good news for the economy, stocks, debt, jobs, housing, cars, etc.
I think you are comparing apples and oranges. Back then, FED didnt care about the inflation bc unemployment was high and bringing unemployment down + stimulating the economy was the priority.

Now that unemployment is at acceptable levels and the growth is strong, FED is only focused on tackling the inflation.
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Nordling
Aug 6, 2025 2:27pm
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Quoting Trader#ADF5
{quote} it’s just a debate now on how much to lower.
That's all that matters to us traders. 3 cuts priced in already. If inflation report comes out hot, markets taking down the possibility of only 1 cut (lowering it to 2 cuts) will help the USD.

I am just saying "if" though. Inflation report can also come up cool as well, supporting the expectations of more rate cuts. Sending USD lower.

It's just my gameplan for the inflation report next week.

Hot data = 2 cuts instead of 3
Cool data = supporting 3 cuts (maybe even more if it's a big miss)
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Vancarbon
Aug 6, 2025 11:28am
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They’re going to ease irrespective of inflation data . If the economy is slowing ( rapidly) then they’re behind the curve .

Inflation could potentially spike with tariffs, however it could be counterbalanced with slowing consumer spending and weakening of the labour markets .

A slowing economy naturally dampens demand thus dampening the push driven supply side . This has knock on effects to corporate profitability , so it’s not a one way street . Markets will likely trade in a range until possible recessionary data appears , producing sharp drops in GDP . The next few months will be bumpy imo .
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Trader#B9E5
Aug 6, 2025 11:07am
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Tariffs are a one and only one time increase in prices. The Fed was perfectly fine to do nothing about the 50% increase in prices from Covid. Yet everyone now thinks a 10% or so one time price hike is going to force the Fed to keep interest rates way too high?

The Fed cares about sustained inflation, as in inflation on top of inflation, not one time price adjustments. After the jobs data they will cut at least twice, and keep cutting if jobs numbers don’t turn around. Very good news for the economy, stocks, debt, jobs, housing, cars, etc.
Reply
Trader#ADF5
Aug 6, 2025 12:26pm
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Quoting Nordling
{quote} I think you are comparing apples and oranges. Back then, FED didnt care about the inflation bc unemployed was high and bringing unemployment down + stimulating the economy was the priority. Now that unemployment is at acceptable levels and the growth is strong, FED is only focused on tackling the inflation.
Sorry, no.
You are correct before the jobs numbers, not now. Americans can easily handle a little more inflation, they are used it so a little more is digestible. However losing jobs is an extreme red flag and talked about by everyone. The Fed, now, has no choice but to catch up, 4.5 is simply too high. Even 3 cuts only takes us to a rate that can still be modestly restrictive. Housing numbers are terrible, everyone agrees rates are too high, it’s just a debate now on how much to lower.
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Trader#6299
Aug 6, 2025 11:32am
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Market currently expects 3 cuts coming, seems quite likely regardless of a little bit of inflation pressure. If the bad jobs were correct then there is zero chance of serious long term inflation.
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