Rate cuts soon – cooling inflation signals Fed confidence and eases businesses

[Rachel, 7/11/24, Washington Post, “Inflation eased further in June, helping cement path to rate cuts”, https://www.washingtonpost.com/business/2024/07/11/cpi-inflation-fed/, accessed 7/14/2024, LR]

Policymakers have been waiting to cement their confidence that inflation is gradually easing. Barring any surprises, economists and Fed watchers quickly rallied around a cut at the central bank’s mid-September meeting.

That kind of timing would bump up against the November presidential election, potentially benefiting Democrats campaigning on a strong job market and solid growth. And it could put more attention, especially from presumptive Republican nominee Donald Trump, on an institution that works hard to stay out of politics.

“A lot can happen between now and September 18, but unless most of the numbers pivot back into ‘hot’ territory, the Fed’s reasoning for not cutting rates may no longer be justified,” Chris Larkin, managing director of trading at E-Trade from Morgan Stanley, wrote in an analyst note.

No matter the timing, a single quarter-point cut won’t overhaul the economy, and financial markets were muted throughout the day. But it would signal that Fed officials are confident that inflation will continue settling down to more normal levels. And it would provide relief for households and businesses feeling the continued strain of high borrowing costs on houses, cars and other loans.