September CPI report 'cements a rate cut,' says Renaissance Macro Research's Dutta

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Renaissance Macro Research 8.0
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Neil Dutta 9.0

September CPI report 'cements a rate cut,' says Renaissance Macro Research's Dutta

yields

I think it sort of cements a rate cut. I mean, I don't think there's really any debate about that... the Fed has the space to continue cutting interest rates. So, I think not only are they going to be cutting next week, but I think it's highly likely that they'll be cutting once more once again in December. Underlying inflation running steady at 3% despite tariff pressures indicates inflation is lower than perceived, giving the Fed room to cut rates, leading to lower yields short term; however, potential government reopening and weaker economic data in 2026 create uncertainty for the long end.

6 calls

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no reliable edge (random outcomes)

10/16/2025 11:32:27 PM	medium term sharp down	20 days later	+2.15%	-3.22%
9/9/2025 5:01:53 PM	short term cautious down	5 days later	+0.05%	-0.02%

So, with today's inflation report, can we add rate cuts to the list of bullish market indicators and will that keep this rally going?

Host
Brooke May

I think that management's had to be cautious. You know, there's been a lot of uncertainty this year around, you know, what tariffs would be, what AI innovations would occur. And so when business when businesses give guidance, they've aired on the side of caution because being wrong or wrong or overestimating can be punitive.
Neil, how does CPI factor in? Especially when particularly on the services side today when you look at core CPI, it came in cooler than expected.

Host
Neil Dutta

Yeah. Well, I think it sort of cements a rate cut. I mean, I don't think there's really any debate about that, Morgan. I mean, last year inflation ran 3% and so far this year it's running 3% despite meaningful upward pressure from tariffs. So, what does that tell you? It tells me that underlying inflation is actually lower than people think, which is why the Fed has the space to continue cutting interest rates. So, I think not only are they going to be cutting next week, but I think it's highly likely that they'll be cutting once more once again in December.
Neil Dutta

To me, the real risk is how we should be thinking about 2026. I mean, if you have to assume that the government will reopen at some point, we start to see the data dripping out and I suspect it'll tell us that the economy is somewhat weaker than the GDP statistics show in the third quarter. And that to me leaves me more bullish frankly on the long end of the Treasury yield curve here.

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