The Fed is nearing a crucial decision
As Federal Reserve Board Chair Jerome Powell prepares to speak at the Fed’s annual Wyoming conference late this week, investors are already looking ahead to the Fed’s next monetary policy meeting with high hopes of a rate cut. Currently, the market-implied odds of a September cut stand at around 80%, with one additional cut expected by the end of the year.
Based on the widely followed Consumer Price Index (CPI), which recently showed headline inflation down from the month prior and in line with estimates, and the weaker-than-expected July employment report, it’s possible the Fed sees a rate cut as necessary to shore up a job market that may be flagging. Additionally, we have yet to see much in the way of meaningful tariff-related pricing pressure on goods.
That said, other signs suggest that fighting stubborn inflation should remain the Fed’s key focus. Supercore inflation, which tracks the services sector excluding goods, food, energy, and housing, rose 0.48% last month, its largest increase since January, pushing its year-over-year rate to 3.2%. This gauge, which covers wage-sensitive categories like medical care, transportation, and education, is considered one of the most stubborn components of inflation.
Supercore Inflation Rate, Month-Over-Month
(as measured by US Bloomberg BLS CPI SuperCore)
Bloomberg, calculations by Horizon, data as 07/31/2025
The upshot: There’s a real tug-of-war going on between the Fed’s twin mandates of price stability and full employment. The next major round of data, including the August payrolls report in early September and the August CPI numbers, will be key in getting a clearer picture of the Fed’s next move. In our opinion, another weak jobs report would likely be enough to spur the Fed into cutting rates when they meet in September.
The US Bloomberg BLS CPI SuperCore, also known as Core Services less Housing, measures the inflation of core services excluding the costs associated with shelter (housing). References to indices, or other measures of relative market performance over a specified period of time are provided for informational purposes only. Reference to an index does not imply that any account will achieve returns, volatility or other results similar to that index. The composition of an index may not reflect the manner in which a portfolio is constructed in relation to expected or achieved returns, portfolio guidelines, restrictions, sectors, correlations, concentrations, volatility or tracking error targets, all of which are subject to change. It is not possible to invest directly in an index. Information obtained from third party sources is believed reliable but has not been vetted by the firm or its personnel.
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