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Markets Rally on CPI Beat Spurs Fed Rate Cut Bets
July inflation data largely met forecasts, boosting bets on a September Fed rate cut and lifting stocks to record highs.
July inflation data largely met expectations, boosting bets on a September rate cut and lifting equity indexes to new highs.
Markets Rally as CPI Beat Spurs Fed Rate Cut Bets
July inflation cooled enough to please investors and stoke bets the Federal Reserve will begin cutting rates soon. The S&P 500 and Nasdaq closed at record highs as traders priced in a September rate reduction and the potential for more cuts later in the year. Fed futures implied a strong probability of a quarter-point cut in September, with chances for another move in October rising from the prior day.
Key Takeaways
"Despite the increase in core inflation, we expect the Fed to cut rates next month as they pay closer attention to the weakening labor market."
Jeffrey Roach, chief economist for LPL Financial, commenting on the inflation data and policy response.
"Inflation is much farther from its target than the unemployment rate, which is why we expect them to hold off rate cuts another few months."
Michael Pearce, deputy chief U.S. economist at Oxford Economics, on the inflation-unemployment dynamic.
"Trump has repeatedly demanded the Fed cut rates, arguing high interest rates are costing the government too much in interest payments on the national debt."
Article notes Trump’s public pressure on the Fed.
"accelerating interest in building on stablecoins and partnering with Circle across every significant sector of the financial industry."
Circle CEO Jeremy Allaire on growth in stablecoins and partnerships.
Beyond the headline numbers, markets are parsing the path of monetary policy alongside evolving corporate news. A cooling inflation signal supports a softer stance from the Fed but leaves policymakers wary of reigniting price pressures. That tension helps explain why investors are hedging their bets with rate-cut expectations that shift with every new data release. On the earnings and corporate front, the day featured mixed signals: airline names traded higher on inflation relief and upbeat demand indicators, while a big insider sell-off in Axon gave some traders a caution flag about near-term momentum in some growth names.
Highlights
- Despite the increase in core inflation, we expect the Fed to cut rates next month as they pay closer attention to the weakening labor market.
- Inflation is much further from its target than the unemployment rate, which is why we expect them to hold off rate cuts another few months.
- Trump has repeatedly demanded the Fed cut rates, arguing high interest rates are costing the government too much in interest payments on the national debt.
- accelerating interest in building on stablecoins and partnering with Circle across every significant sector of the financial industry.
Political and regulatory sensitivity tied to Fed policy and tariffs
The piece touches on central bank independence, political pressure from public figures, and tariff effects. These factors can provoke political backlash and investor volatility, especially if policy signals swing with headlines.
Policy signals will keep shaping markets as new data arrives.
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