Fed-funds futures price roughly two quarter-point cuts by year-end. The labor data is consistent with that path. The inflation data, at the margin, is not.

The June CPI print came in at 2.7% on the core measure, essentially flat against May. Shelter disinflation has stalled at a level Federal Reserve staff economists spent last year arguing was mathematically improbable. Goods prices have begun to firm again, in part because the tariff pass-through everyone assumed would arrive in the fourth quarter of 2025 arrived, instead, in the second quarter of 2026.

The split on the Committee

Three voting members have publicly signaled comfort with cutting at the September meeting. Two have publicly resisted. The remainder, as ever, are watching the data and reserving the right to surprise.

The dovish case is that policy is well into restrictive territory on any credible measure of the neutral rate, that the labor market is decelerating in a controlled fashion, and that waiting for perfect confirmation is how the Fed ends up behind the curve. The hawkish case is that the last mile of disinflation has consistently surprised to the upside and that cutting into re-accelerating goods prices would be an unforced error.

What would move the third cut into the strip

A payrolls print below 75,000 with a two-tenths tick up in the unemployment rate would do it. A credit event in commercial real estate would do it. A tariff-driven price impulse that unwinds faster than expected would do it. Absent one of those, the September and December meetings look like the ceiling, not the floor, of the easing cycle.

About the author

Clara Montgomery

Business Editor in New York. Covers public markets and the private capital cycle.