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with u.s. cpi data exceeding expectations on wednesday, speculation about the extent of the federal reserve's interest rate cut next week is close to being settled.

at a time when fed officials were collectively silent, nick timiraos, a well-known macro journalist known as the "fed's mouthpiece," wrote on wednesday that the continued weakening trend of inflation is a good opportunity for the fed to start next week.gradually reduceinterest rates paved the way, but an unexpected rise in housing inflation has officials worriedit is difficult to push for a larger rate cut。

(source: x)

to briefly summarize the us cpi in august: nominal cpi rose 0.2% month-on-month and 2.5% year-on-year, both in line with expectations; the biggest problem was the core cpi, which increased by 0.3% month-on-month (actually 0.281%) driven by housing costs, higher than the market's general expectation of 0.2%; the core cpi annual rate was 3.2%, in line with expectations.

unlike the nominal cpi, which fell to its lowest level since february 2021, the core cpi fell significantly more slowly.the core cpi month-on-month data has risen for 51 consecutive months, which is also a new record in us history.。

what is most worrying is thatthe annual rate of housing inflation also rose for the first time since early 2023！

"set the tone" to cut interest rates by 25 basis points

timi laws said,stronger housing inflation caused core inflation to rise more than expected in august, which could make it harder for officials to push for a bigger 50 basis point rate cut at next week's meeting.。

of course, investors don’t have to worry too much about the fed changing its mind and not cutting interest rates.wednesday's cpi data will not change the stance of most central bankers who are ready to start cutting interest ratesthe only remaining point of disagreement is that "some officials" have not completely ruled out the possibility of a larger interest rate cut.

in addition to inflation data, investors are now paying more attention to the health of the us economy. as inflation eases, the us labor market has also begun to cool down significantly - the growth rate of new jobs and wages has slowed down, and the time it takes for the unemployed to find new jobs has also increased. e-commerce giant amazon also reported that consumers are buying more discounted goods and low-priced daily necessities.

timiros believes thatfor the fed meeting next week, in addition to paying attention to the extent of the interest rate cut, we should also pay attention to fed chairman powell's views on the health of the economy.。

so…what to expect for the remaining two meetings during the year?

as the federal reserve's 25 basis point interest rate cut next week is almost certain, the investment market has also begun to look forward to the last two federal reserve interest rate meetings this year.

affected by the us election this year, the federal reserve fomc's november resolution will be postponed to november 7, which will be a rare "friday morning resolution" moment. the last meeting of the year will announce the resolution on december 18.

according to the latest changes in cme's "fed watch", against the backdrop of a 25 basis point rate cut in september,in november, the market is still wavering between a further 25 basis points or 50 basis points rate cut, with the probability of each being around 40-50%.。

(federal reserve rate cut expectations in november, source: cme)

expectations for the further december meeting are more mixed.the most mainstream expectation at present is that the federal reserve will cut interest rates by a total of 100 basis points this year., which means there will be at least one 50bp rate cut in the next three meetings. also different from the cautious fed's statement, the probability of only three 25bp rate cuts this year is only 17.2%.

(federal reserve rate cut expectations in december, source: cme)

regarding this issue, the federal reserve will also release its latest economic forecast next week, which will include the latest "dot plot". in june this year, due to the unexpected rebound in inflation at the beginning of the year, more than half of the officials gave the expectation of "a maximum rate cut this year". as the situation progresses, that expectation has long been outdated.