Dowling Securities: The Federal Reserve is expected to start cutting interest rates ahead of schedule in September.

According to the US July CPI report released on Tuesday, strategists at JPMorgan predict that the Federal Reserve will start cutting rates earlier, moving the timeline from October to September. JPMorgan still expects the Fed to cut rates a total of six times, by 25 basis points each time, ultimately reaching a rate of 3%. Specifically, they anticipate three rate cuts this year, one each quarter next year until the end of September; previously, the expectation was for two rate cuts this year and four next year. JPMorgan strategists Oscar Munoz and Gennadiy Goldberg said in the report, "Given signs of weakening conditions in the labor market, we believe today's inflation data may prompt some Fed officials who are still cautious about the next policy path to change their views." They predict that Fed Chair Powell will "signal in his speech at the Jackson Hole next week that the Fed leans towards starting monetary easing in September." JPMorgan's strategy team also revised down their forecast for the 5-year Treasury yield at the end of 2025 from 3.70% to 3.65%.