Wall Street bets on a September rate cut, with Federal Reserve officials responding: It’s still too early to say.

Cailian Press, August 15th (Editor Zhao Hao)
The Chair of the St. Louis Federal Reserve, Alberto Musalem, recently stated that it is still too early to conclude whether a rate cut will be implemented at the next meeting in September.
On Thursday, local time (August 14th), during an interview, Musalem said, “For me, it’s still too early.”
“I can’t say with certainty what policy stance I would support at the September meeting,” he added.
Last month, the Federal Reserve maintained the federal funds rate target range unchanged at 4.25% to 4.50%, marking the bank’s consistent inaction throughout the year.
In contrast, the Fed had cumulatively cut interest rates by 100 basis points last year’s last few months. This led Trump to repeatedly criticize Chairman Powell for being “too political” and unfit for his position.
Powell explained at the July resolution press conference that the impact of tariff hikes led by Trump on U.S. economic activity and inflation remains to be observed.
Affected by the lower-than-expected increase in CPI on Tuesday, the market initially began to expect a 50 basis point rate cut at the September meeting.
This week, Treasury Secretary Scott Mistant also stated multiple times that considering the lack of rate cuts in June and July, as well as the non-farm employment figures falling short of previous estimates, a 50 basis point rate cut in September might be reasonable.
However, Musalem expressed that from his perspective, a rate cut of 50 basis points “doesn’t align with the current economic situation and its prospects.”
Musalem pointed out that on one hand, “data starts to give some signals, showing…”, but he also admitted “there is a downside risk in the labor market.”
Musalem mentioned that the slowdown in U.S. economic growth, combined with pressure on corporate profit margins due to tariffs, could threaten the labor market, which has been performing robustly so far.
“I’m weighing these two factors,” he said, “when we see conflict between our dual mission goals, we need to adopt a balanced approach.”
Although the CPI was below expectations, the unexpected rebound in PPI earlier in the day brought uncertainty. Data shows that U.S. PPI rose by 0.9% month-on-month in July, the last time it reached 0.9% was in May and June of 2022.
Analysts believe that new inflation is penetrating the entire economic chain, even though consumers have not directly felt it yet.
Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management, noted that the unexpected rise in PPI undoubtedly dampened the optimistic sentiment of “a rate cut in September.”