Moody’s Analytics Chief Economist Mark Zandi said the Federal Reserve is more likely to cut rates next week despite inflation running above target, citing a stalled labor market and rising recession risks.
CPI At 2.9%, Still Above Fed Target
Speaking on CNBC ahead of Thursday’s consumer price index release, Zandi noted that headline CPI at 2.9% remains “above the Fed’s target,” given that the central bank tracks the personal consumption expenditures index, which typically runs lower.
“If you’re at 2.9, it’s about a half a point above what it should be,” he said.
Still, Zandi stressed that weakening jobs data will likely outweigh concerns about inflation.
“Job market is really now at a standstill. Job growth is flat at best. And I think that’s going to win the day … that’s why we’re going to get the rate cuts,” he explained.
Softer CPI Could Open Door To Bigger Fed Cut
If CPI comes in softer than expected, Zandi suggested markets could begin pricing in a more aggressive move.
“If it comes …