The market really liked what it saw in Tuesday’s inflation report. The Bureau of Labor Statistics reported that the consumer price index increased by 2.7% year over year in July . That’s slightly less than a Dow Jones estimate for a 2.8% advance. The report jolted stocks . Futures contracts tied to the major U.S. benchmarks surged following the release, as the new data gave investors hope the Federal Reserve will cut rates not once, not twice, but three times before year-end. Take a look at Fed rate cut expectations for the final three meetings of the year relative to where they were on Monday — based on interest rate futures data from the CME Group’s FedWatch tool: September: 91.8% chance vs. 85.9% on Monday October: 66.3% chance vs. 55.1% December: 56.7% chance vs. 45% The latest inflation report, however, wasn’t without blemishes. The core CPI, which strips out food and energy prices, expanded more than anticipated, growing 3.1% year over year versus a consensus for a 3% gain. Take a look at what strategists and investors around Wall Street are saying: Alexandra Wilson-Elizondo, global co-CIO of multi-asset solutions at Goldman Sachs Asset Management: “The Fed is getting the data support that the tariff effect on price level will mostly be transitory. Tariffs have yet to drive substantial price increases, as companies continue to offset cost pressures by drawing down inventories and adjusting prices cautiously due to perceived consumer price sensitivity. … In essence, this inflation print supports the narrative of an insurance rate cut in September, which will be a key driving force for the markets.” Skyler Weinand, chief investment officer at Regan Capital: “Tuesday’s CPI data was tame enough that it gives the Federal Reserve the green light to cut rates by at least 25 basis points in September and opens the possibility of a larger 50 basis point cut in September. This data, coupled with the weak July employment report from earlier this month, puts the nail in the coffin for lower interest rates.” Josh Jamner, senior investment strategy analyst at ClearBridge Investments: “CPI data that was in-line with expectations will not change the outlook for a September rate cut which was already largely priced into markets, but should provide a boost to risk assets with equities higher and interest rates lower as traders unwind hedges they had put in place to protect against the risk of an upside surprise in the data, which failed to materialize.” Art Hogan, chief market strategist at B. Riley Wealth: “The CPI report is reminiscent of the philosophical question – ‘If a tree falls in a forest…’ The report is very much in line with expectations. Core goods are the real driver of the move up in the index, while being somewhat offset by energy and shelter cost. The report will likely not change the path forward for the Fed, as we expect to see rate cuts at the next three meetings. The market can now move on to shifting its focus to potential trade deals.” Peter C. Earle, director of economics and economic freedom at the American Institute for Economic Research, on CNBC’s ” Squawk Box “: “I’m not really a big fan of these numbers. … We knew that tariff-related cost pressures were going to be a key upside going to this release. Not as bad as we thought, but I mean, still, this is going to complicate the work of the Fed a bit.” Chris Zaccarelli, CIO at Northlight Asset Management: “In this environment stocks can continue to move higher and it is going to take a much larger inflation number – or other shock to the market – for a correction to commence. With many strategists expecting volatility in the months ahead, yet recommending that dips should be bought, it’s hard to envision a very large pullback absent an actual recession.” Daniel Siluk, head of global short duration and liquidity at Janus Henderson Investors: “The July CPI report came in broadly in line with expectations, reinforcing the view that inflation is under control, even if not quite at target. The headline print was contained by falling energy and gasoline prices, while services remained the primary driver of the overall increase.” Peter Boockvar, CIO at One Point BFG Wealth Partners: “Both Treasurys and the S & P futures are breathing a sigh of relief that it wasn’t higher than expected but 3.1% y/o/y core CPI is still well above 2%. I know some on the Fed and one new member joining temporarily seem to be very confident on how the economic data will play out over the next 4 months but I’m much less confident as the tariff impact will continue to flow through the data and I must say, many service companies too are feeling the higher cost of goods prices, it’s not just manufacturers.” — CNBC’s Sarah Min and Alex Harring contributed reporting.
