Rate cuts likely in Sept., Nov., Dec., Macquarie says, as disinflation continues

Investing.com -- The duo of inflation reports released this week showed the disinflation trend is likely to continue, paving the way for the Federal Reserve to deliver three rate cuts this year starting in September, Economists at Macquarie said in a Wednesday note.

The inflation data overall for July are "supportive of a sustained disinflation trend,"  Macquarie said, and when combined with the recent softening in the labor market strengthens the case for near-term Fed rate cuts. 

"We continue to anticipate a rate reduction of 25 bps in September with cuts also likely in November and December," the economists added. 

The bets on a series of rate cuts ahead followed a duo of CPI and PPI reports that underscored progress on slowing the pace inflation. 

Data on Wednesday showed the consumer price index slowed to a 2.9% pace from a 3.0% pace in June, compared with economists estimates for 3%.

Stripping out more volatile items like food and fuel, the "core" number climbed by 3.2% in the twelve months to July, below projections of 3.3%. 

The CPI and PPI readings are estimates to result in a  0.14% month on month rise in the core PCE, the Fed's preferred inflation gauge, for the month.

Still, while a rate cut is widely expected in September, the size of the cut or futures cuts will hinge on "the data flow, with inflation and employment readings taking on particular importance."