Despite the fact that the inflation reading today was largely in line with expectations, inflation is still running hot at +2.7% year over year at the headline level and +3.1% year over year based on core data. The market is now pricing in 3 rate cuts this year – a 25 basis point reduction in September, October and December. In particular, Inflation in Services remains elevated while prices in Goods looks to be moving higher.
In general, the Fed Funds Rate has only been reduced with above target CPI during recessionary periods.
August 12, 2025
Despite the fact that the inflation reading today was largely in line with expectations, inflation is still running hot at +2.7% year over year at the headline level and +3.1% year over year based on core data. The market is now pricing in 3 rate cuts this year – a 25 basis point reduction in September, October and December. In particular, Inflation in Services remains elevated while prices in Goods looks to be moving higher.
In general, the Fed Funds Rate has only been reduced with above target CPI during recessionary periods.