By Staff Reporter
The U.S. Federal Reserve is expected to keep interest rates unchanged this month, but fresh inflation data is fueling growing speculation that a rate cut could arrive sooner than anticipated, according to Nigel Green, CEO of global financial advisory giant deVere Group.
“This CPI report gives the Fed exactly what it’s been looking for: clear evidence that inflation is cooling in line with its target,” Green said in a statement Tuesday.
“They’ll stay on hold for now, but they won’t be able to justify it for much longer. A cut this year is now not just likely, it’s looking increasingly necessary.”
The May Consumer Price Index (CPI) showed core inflation rising by 0.2% month-over-month, while the annual rate ticked up slightly to 2.9% from 2.8%. While the year-on-year change was modest, the consistency of the 0.2% monthly increase aligns with what policymakers consider acceptable.
“This is the second time in three months that we’ve seen the core CPI line up with what the Fed considers acceptable monthly progress,” Green explained, noting that the central bank is closely watching monthly figures to gauge real-time inflation momentum.
“Markets and the central bank are focused on that monthly trend and this one points clearly in the right direction,” he said.
While the year-on-year inflation rate can be influenced by multiple factors, Green emphasized that the Fed is mainly seeking assurance that prices are no longer accelerating rapidly a reassurance provided by this latest data.
As a result, market expectations have shifted. “Markets are now pricing in a much higher probability of a rate cut in September,” said Green. “That’s a clear change from just a few weeks ago, when some still feared no cut at all this year.”
He acknowledged the Fed’s challenge: “It doesn’t want to move too early but if it waits too long, it risks doing unnecessary damage to the economy.”
Adding to the complexity is the global monetary environment. “The European Central Bank has already cut. Others are expected to follow. If the Fed falls too far behind, that will have major implications for the dollar, capital flows, and investor confidence,” Green warned.
He also advised investors to brace for potential volatility, as the Fed’s actions could significantly affect portfolio strategies in the months ahead.
“If the Fed cuts too late, risk assets will struggle. If it signals a move too early, inflation expectations could reignite. The balancing act is extremely fine,” he said. “But today’s data gives the Fed a reason to begin preparing the market for action.”
Green concluded, “This is the moment investors could look back on as the shift point. The Fed’s next move won’t come today, but the countdown has begun. Cuts are coming and the timing may surprise some.”
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