The Fed’s Preferred Inflation Gauge Stays Cool, Keeping a Rate Cut Imminent

Published On Aug 30, 2024, 8:52 AM

Inflation in the U.S. remained steady in July at an annual rate of 2.5%, with a core inflation rate, which excludes volatile food and energy prices, at 2.6%. These figures indicate that inflation is gradually moderating, which could lead the Federal Reserve to lower interest rates in their upcoming September meeting. Consumer spending remains strong, contributing to an overall positive economic outlook despite prices holding higher than the Fed's target of 2%.

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Stock Forecasts

XLYView XLY chart on TradingView

Positive

With inflation moderating and the likelihood of interest rate cuts from the Federal Reserve, the market may react positively, particularly for sectors sensitive to interest rate changes such as consumer discretionary and real estate.

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Negative

Lower interest rates could diminish the appeal of dividend-paying stocks in the short-term if growth sectors gain more attention, which could impact traditional income-producing stocks negatively.

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