JPMorgan expects September Fed rate cut despite CPI risks and warns of S&P 500 volatility

Key Takeaways

JPMorgan expects the Federal Reserve to cut interest rates by 25 basis points in September, despite CPI inflation risks.
August CPI is projected at 2.9% year-over-year, with core CPI at 3.1%.

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JPMorgan expects the Federal Reserve to cut interest rates by 25 basis points in September despite lingering uncertainty around consumer price index data.

The bank projects August CPI at 2.9% year-over-year, with core CPI holding steady at 3.1% year-over-year. A higher-than-expected inflation reading could push rate cuts to October or December.

JPMorgan outlined potential market reactions to different CPI scenarios. Core CPI above 0.40% could cause the S&P 500 to drop 1.5% to 2.0%. A reading between 0.35% and 0.40% may trigger losses of 0.5% to 1.0%. Core CPI below 0.25% could lift the index 1.3% to 1.8%.

The bank maintains a tactically bullish stance while flagging risks from inflation, employment data, and trade developments.

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