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11/07/24
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Wall Street Banks React to Soft CPI
On Wednesday, prominent investment banking advisory firms, including Evercore ISI, ING, and Wells Fargo, said they believed the Federal Reserve was now ready to cut interest rates in Sept. after a weaker-than-expected Consumer Price Index report.
The CPI data for June showed an increase of 0.06% in core inflation, which excludes volatile energy and food prices, indicating a deceleration in inflation’s pace since Q1 of this year.
The easing in the core CPI, including a sizeable easing in the housing services inflation which has been persistently high, bolsters the view that inflationary pressures are cooling.
In a note, Wells Fargo economists said the CPI reading was arguably the most encouraging one the Fed has received since it started its fight against inflation nearly two and a half years ago.
Despite some components of the CPI not aligning with the core Personal Consumption Expenditures (PCE) price index, Evercore says the overall trend indicates a sustained decline in inflation rates.
Earlier this week, Fed Chair Jerome Powell voiced worries about being able to achieve a ‘soft landing’ for the economy, balancing a still robust labor market with the cooling of inflation.
Evercore noted that the labor market has cooled significantly, reducing the chances of wage-driven inflation, while the risks of higher unemployment are more pronounced.
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