As Inflation Slows Down, Rate Cut Expectations Grow

Inflation and interest rates remain in the spotlight. Now that the U.S. inflation rate has eased to its lowest level in more than a year, there is more reason to believe the Fed will feel comfortable lowering its benchmark policy rate in the coming months. The June consumer price index (CPI) recently released shows that inflation has cooled. Excluding the volatile food and energy sector, Core CPI registered at 3.3% year over year – down from May’s 3.4% and the lowest rate seen since 2021.

While the Fed meets next on July 31, interest rate futures are telling investors that there is now more than a 90% chance of a rate cut from the current 5.5% policy rate, but not until the September 18 Fed meeting date.

Although our team at Tolleson doesn’t make investments based on interest rate forecasts, a decline in inflation is good for financial asset prices. Our strategy is designed to capitalize on favorable market conditions without relying on broad economic projections. We remain committed to a long-term investment mindset focused on a diversified portfolio that can withstand shifts in the investment landscape.

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