Uncertainty over the Federal Reserve’s next rate cut has heightened following a rise in shelter prices from July’s consumer price inflation report, which showed a 0.2% CPI increase, driven largely by a 0.4% rise in shelter costs. This has led to mixed expectations regarding whether the Fed will implement a 25 or 50 basis point rate cut in September. Markets are now focused on next week’s Jackson Hole economic symposium, where Fed Chair Jerome Powell is expected to signal a likely cut.
However, the final decision may remain uncertain until after key economic data is released in early September, including jobs and inflation reports. Traders are closely monitoring any Fed comments for guidance, as they currently see a 56% chance of a 25 basis point cut and a 44% probability of a 50 basis point reduction, reflecting growing anticipation of the Fed’s next move amidst recession concerns.