Fed likely to cut rates in September after positive inflation data, though some economists expect less aggressive easing given modest price pressures.

The Fed is expected to cut rates in September after encouraging inflation data. The PCE price index rose just 0.1% in June, nearing the 2% target. However, some economists believe the Fed may not ease as aggressively as markets expect, given the modest inflation and slowdown in consumer spending. The central bank is also monitoring the labor market.

The Federal Reserve is expected to cut interest rates in September following encouraging inflation data. The personal consumption expenditures (PCE) price index, the Fed's preferred gauge, rose just 0.1% in June, putting the year-over-year increase at 2.5%, closer to the 2% target. This has fueled expectations that the Fed will signal a rate cut in September. However, some economists believe the Fed may not ease as aggressively as markets expect, given the modest June inflation reading and a slowdown in consumer spending growth. The central bank is also closely watching the labor market, where the unemployment rate has risen and job growth has slowed. Overall, the latest data has set the stage for the Fed to begin cutting rates in September, though the pace and timing of further easing remains uncertain.

The Federal Reserve is expected to cut interest rates in September following the latest inflation data, which showed encouraging signs of progress. The personal consumption expenditures (PCE) price index, the Fed's preferred inflation gauge, rose just 0.1% in June, putting the year-over-year increase at 2.5%, closer to the central bank's 2% target.

This data has fueled expectations that the Fed will signal at its upcoming policy meeting in late July that it could start reducing rates in September. Policymakers have said they want to be confident inflation is heading sustainably back to the 2% goal before cutting the policy rate from the current 5.25%-5.50% range.

However, some economists believe the Fed may not be able to ease as aggressively as financial markets expect, given the relatively modest June inflation reading and a slowdown in consumer spending growth. The central bank is also closely watching the labor market, where the unemployment rate has risen in recent months and job growth has slowed, raising concerns about potential harm to the economy if rates stay too high for too long.

Despite these concerns, the latest data has reinforced the view that the Fed is on track to begin cutting interest rates in September. Traders of futures tied to the Fed policy rate have added slightly to bets that the central bank will deliver a total of three rate cuts by the end of this year, with contracts pricing in a policy rate of 4.64% in December.

The core PCE price index, which excludes volatile food and energy costs, rose 0.2% last month, a bit more than expected. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, also slowed in June, rising 0.3% from May after a 0.4% increase in the prior month.

Overall, the latest inflation and economic data has set the stage for the Fed to begin cutting interest rates in September, though the pace and timing of further easing remains uncertain and will depend on how the economy and price pressures evolve in the coming months.

The Federal Reserve is seen on track to cut interest rates in September after the latest inflation data showed encouraging signs of progress. The personal consumption expenditures (PCE) price index, the Fed's preferred inflation gauge, rose just 0.1% in June, putting the year-over-year increase at 2.5% - closer to the central bank's 2% target.

This data has fueled expectations that the Fed will signal at its upcoming policy meeting on July 30-31 that it could start reducing rates in September. Policymakers have said they want to be confident inflation is heading sustainably back to the 2% goal before cutting the policy rate from the current 5.25%-5.50% range.

The relatively modest June inflation reading, along with a slowdown in consumer spending growth, has led some economists to believe the Fed may not be able to ease as aggressively as financial markets expect. However, the central bank is also closely watching the labor market, where the unemployment rate has risen in recent months and job growth has slowed, raising concerns about potential harm to the economy if rates stay too high for too long.

"From the Fed's perspective, cumulatively, we think the data show enough progress - on both inflation and labor market conditions - for policymakers to open the door to a rate cut in September at next week's FOMC meeting," said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

After the inflation data release, traders of futures tied to the Fed policy rate added slightly to bets the central bank will deliver a total of three rate cuts by the end of this year, with contracts pricing in a policy rate of 4.64% in December.

The core PCE price index, which excludes volatile food and energy costs and is the Fed's preferred inflation gauge, rose 0.2% last month, a bit more than the 0.1% economists had projected. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, also slowed in June, rising 0.3% from May after a 0.4% increase in the prior month.

Some economists argue that the cooling in consumer demand and inflation may not be proceeding fast enough to allow for as much policy easing as financial markets expect. Bank of America economists said they remain comfortable with their forecast that rate cuts will start in December, but upcoming data could potentially prompt an earlier move by the Fed.

Overall, the latest inflation and economic data has reinforced the view that the Fed is on track to begin cutting interest rates in September, though the pace and timing of further easing remains uncertain and will depend on how the economy and price pressures evolve in the coming months.