The August CPI figures reflect a cooling in inflation pressures, indicating a potential shift in monetary policy with the Fed expected to cut rates in September.
Annual inflation fell to 2.5%, the lowest since February 2021, suggesting greater confidence in reaching the 2% target, influencing investor sentiment.
The FOMC's focus has shifted to the labor market dynamics, which will guide the pace and magnitude of future rate cuts after normalization.
With 500bp potential for rate reductions, and possibly ending quantitative tightening, the Fed's position appears robust, allowing equities to remain resilient amid volatility.
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