Spartan Capital Securities: U.S. inflation may have peaked, but a 25 or 50 basis point rate cut remains controversial

Peter Cardillo, chief market economist at Spartan Capital Securities, said today's PCE report is all good numbers, and certainly they show that inflation has peaked and is continuing to move lower. Personal income (growth) is not very strong, and consumption continues to move higher, which suggests that the probability of a recession in the first six months of 2025 is at best minimal. It is clear that the Fed will cut interest rates, and I think whether the rate cut will be 25 or 50 basis points is still controversial, and it will all depend on next week's employment data. If the data is much weaker than expected, assuming (employment) growth is less than 100,000, then the probability of a 50 basis point cut will increase, especially if inflation is moving in the right direction. He said: "I expect the Fed to have three rate cuts, and may cut by 0.5 percentage points in September, depending on the employment data. Otherwise, there will be a 25 basis point cut in September and a 50 basis point cut in December." (Jinshi)