ING Bank: Odds Favor a U.S. Interest Rate Cut in September
In a note released on Thursday evening, Dutch investment bank ING discussed their expectations for when the U.S. Federal Reserve might begin cutting interest rates this year, given the latest data released in the United States this week.
Anticipated September Rate Cut by the Federal Reserve
According to the experts at ING, they anticipate that the Federal Reserve will make its first interest rate cut during the Federal Open Market Committee (FOMC) meeting in September, due to the weakness reflected in this week's data.
Key Reasons for the Predicted Rate Cut
1. Supportive Data from the Producer Price Index and Unemployment Claims:
Recent data on the U.S. Producer Price Index (PPI) and unemployment claims bolster the case for the Federal Reserve to start reducing interest rates in September.
2. Spike in Unemployment Claims:
The increase in U.S. unemployment claims has reached its highest level since August of last year, indicating a significant slowdown in the labor market. This development poses an upward risk to the Federal Reserve's forecast of maintaining the unemployment rate at 4%. Unemployment claims rose from 229,000 in the first week of the month to 242,000 last week.
3. Weak Producer Price Index Data:
The weak PPI data increases the likelihood of a second consecutive rise of 0.2% or less in personal consumption expenditures. The PPI showed a monthly contraction in May, contrary to market expectations, and the core annual PPI slowed more than anticipated in May.
Conclusion:
The combination of rising unemployment claims and weak PPI data strengthens the probability that the Federal Reserve may start cutting interest rates in September.
