Stocks Rally as Powell Fuels Bets on September Cut

David Russell, Global Head of Market Strategy at TradeStation: ”The Fed inched toward a rate cut by noting higher unemployment and saying inflation is only somewhat elevated. The data has moved in Powell’s direction and now he’s getting ready to follow. Given the amount of time before the September meeting, this is what we’d expect at this time. Jobs data on Friday and CPI in two weeks are the next big items points. If those go well, we could get clearer messaging from Powell at Jackson Hole in late August.”

Brian Henderson at BOK Financial: “From an economic standpoint, if they cut twice this year, it won’t be a huge impact, and the rule of thumb is that it will take nine to 18 months before the economy feels the full brunt of rates going higher or, in this case, rates coming down. approach. Although it might already be too late to fend off a recession by cutting rates, dawdling now unnecessarily increases the risk.”

Seema Shah, Chief Global Strategist, Principal Asset Management: “The balanced statement should fool nobody. The Fed contemplates its word choice long and hard, and the new emphasis to risks to both sides of the dual mandate adds a slight dovish twinge which cracks the door open to the September cut that everyone is expecting.”

Scott Pike at Income Research + Management: ”Today’s FOMC Statement, with the slightly dovish shift to the language around both inflation progress and labor market balance, helps moves us further down the path towards a rate cut at their meeting in September.”

Greg McBride at Bankrate: ”The Fed has tee’d things up nicely for a September rate cut – as long as the inflation data cooperate. The escape hatch from cutting rates is if inflation doesn’t continue to demonstrate consistent movement toward the 2% target. There are no less than four changes in wording within the Fed’s statement that acknowledges the evolving picture in the job market. If the job market should show evidence of cooling off at an alarming pace between now and the September Fed meeting, the first rate cut could be a larger half-point cut. There would be plenty of advance notice if this should come to pass.”

Florian Ielpo at Lombard Odier Investment Managers: “The statement shows a shift in the decision weights of the U.S. central banks from a large weight on inflation to a balanced set of weights between unemployment and inflation. This opens the door to a September cut without calling it for sure.”

Julian Howard at GAM Investments: “Pressure to cut rates is mounting. However, for the Fed, it’s no slam dunk. Credibility matters a lot. If the economy softens and inflation eases further but the Fed has done nothing in the meantime, that will be seen as sleepwalking. It is then likely the dreaded words ‘policy error’ will start to circulate. Today’s decision may not have been a surprise, but to say that September’s one will be closely watched would be an understatement.”

Bill Adams at Comerica Bank: ”The unemployment rate is ticking higher, payrolls growth and wage growth are slowing, and inflation by the Fed’s preferred yardstick is trending lower and doesn’t look far from 2% with glasses off. These data are tangible evidence that the US economy is around the point where the Fed should take the foot off the brake.”