BNP Paribas: PPI and CPI reports should pave the way for September rate cuts

In response to the latest CPI and PPI data, BNP Paribas argued that Federal Reserve (Fed) officials should have obtained all the necessary indicators to announce interest rate cuts since 2020 at the FOMC in September.

In a memo for investors announced on Wednesday, BNP Paribas stated, “The consumer price index (CPI) for July continues to tell the story of disinflation, and it seems that this disinflation will continue throughout this year.”

The Fed's inflation rate is steadily returning to 2%, and in order to be convinced that the path to September interest rate cuts has been reached, the current CPI should be the last data.

According to CME's FedWatch tool, the probability that interest rate cuts of 25 basis points will be made at the FOMC on 9/18 is 56.5%, and the probability that interest rate cuts of 50 basis points will be made is 43.5%.

These figures are slightly different from those before the CPI was announced. Prior to the announcement, the probability of a 50 basis point rate cut was 52.5%, and the probability of a 25 basis point rate cut was 47.5%.