If Inflation Ticks Up, Forget About September Rate Cut

Even with unemployment rising and the risk of recession increasing, there will be no rate cut in September if inflation ticks up.

After the Federal Open market Committee met last week, Fed Chair Jerome Powell seemed to suggest that although interest rates we left unchanged at that meeting, a September interest rate cut was likely. With recent weak jobs numbers, Wall Street is predicting nearly a 100% probability that rates will be cut in September. Will they be cut?

The Consumer Price Index (CPI) number for July will be released on August 14. It looks like that number could show a slight increase from the prior month, raising the one-year CPI. The August CPI number will be released in mid-September. While it is too early to forecast that number, it too could rise.

If that is the case, then the Fed will not cut interest rates at their September meeting. That means the earliest interest can fall in November.

Virtually all Americans want to see interest rates fall. Business needs lower rates to grow their businesses and increase their hiring. Consumers need lower rates so they can afford to buy big ticket items like houses and cars. And households need lower rates, so their credit cards are not so expensive.