Inflation may be cooling, but Macquarie continues to call for no cuts this year

Investing.com -- The winds of disinflation appear back on the horizon following the latest consumer inflation report, reigniting hopes for a September rate cut, but some Wall Street aren't ready join in and continue to call for no rate cuts this year.

"[O]ur baseline case for FOMC policy is unchanged on the release," of the CPI data, Macquarie said in a Wednesday note. "We see a rate cut as only likely in 2025."

Data on Wednesday showed the consumer price index slowed to 0.3% pace in April from 0.4% a month earlier, slower than the 0.4% pace economists had expected, boosting hopes of September rate cut. 

Fed-funds futures indicate a 52.1% chance that the Fed will cut rates in September, up from 49% a day earlier, according to Investing.com's Fed Rate Monitor Tool.

The cooling in consumer inflation was driven by a deceleration in services pricing with this apparent in both the rent and owners equivalent recent, or OER, component and services excluding housing.

Services excluding housing, or so-called super core inflation, is another closely watched measure for the Fed, as the measure removes pandemic-related distortions, and some believe is better gauge of how well or not the Fed is curbing inflation.    

While April's consumer inflation print proved a slight moderation from March both on a monthly and trend basis, Macquarie says, the bigger inflation picture, when the hot price producer price index figures from a day earlier are included, is still one showing price pressures remain sticky. 

Together with the inputs from the PPI earlier this week, Macquarie forecasts the underlying data to point to a reading of 0.25% growth in core PCE, a Fed's key inflation measure, for April. 

The next set of PCE data is due on May 31.

Still, the data when combined April's employment report should provide "reassurance to Chair Powell that current guidance that the next move is likely to be a cut remains appropriate," Macquarie said.