With the last inflation report before the Fed meeting showing 2.9%, there’s an imminent rate cut and stocks rise.
U.S. shares advanced on Thursday when the last inflation report before next week’s Federal Reserve meeting showed that consumer prices rose 2.9% in August from a year ago, the same as predicted and an increase from 2.7% in July. The action didn’t change Wall Street’s assumption of a September rate cut too much, and the big indexes moved closer to new highs. As of this report writing, the Dow has crossed 46,000 for the first time ever. The S&P 500 and Nasdaq also rise to hit record highs.
The inflation data was presented through the Consumer Price Index (CPI) that was released on Thursday. The Labor Department pointed out that in August, headline CPI rose 2.9% compared with the previous month last year, whereas core prices rose 3.1%, the same rate as in July. The headline CPI rose 0.4% from month to month, while the core CPI rose 0.3%.
Meanwhile, fresh proof that the job market is slowing down made everyone more confident that the Fed will cut interest rates. The number of initial jobless claims was 263,000 for the week ended September 6, a high since 2021. This is further proof that demand for work is slowing down. The combination of rising inflation and more subdued job growth convinced people that the Fed would cut rates by a quarter point next week.
The European Central Bank kept rates steady, holding a stand after a series of cuts this year so far. The action kept policy divergence in the spotlight, and investors expected the Fed to start reducing borrowing costs as soon as next week.
In short, on Thursday, investors ignored a moderate rise in inflation and focused on a dismal employment picture, assuming the Fed would maintain growth dangers top of mind. Stocks advanced on that presumption, with the Dow has reached at more than 46,000 and the larger market on its way to record territory.
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