Fed seen on track to Sept rate cut after inflation data

Federal Reserve policymakers may feel more confident that inflation is back on a downward path after a U.S. government report showed consumer prices did not rise at all in May, potentially paving the way for interest-rate cuts in coming months.

U.S. central bankers, who wind up their meeting on Wednesday, are universally expected to make a decision to hold the policy rate in its current 5.25%-5.5% range.

But the unexpectedly benign inflation report, which also showed underlying price pressures cooled to a level more consistent with the Fed’s 2% inflation goal, could set them up for a rate cut as soon as September, and another one in December.

“After three months of veering off-track, the disinflation bus is back on the road to 2%,”said Brian Jacobsen, chief economist at Annex Wealth Management.

 

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