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Investors Brace for Key US Inflation Report, Casting Doubt on Fed Rate Cut Pace
26 Aug
Summary
- Doubts linger over pace of Fed rate cuts
- Looming US inflation report may derail rate cut expectations
- Nvidia earnings to test AI-driven market rally
As of August 26th, 2025, the sense of euphoria around the prospect of Federal Reserve rate cuts has eased, just days after Chair Jerome Powell signaled a September rate cut is likely amid downside risks to the jobs market. However, doubts over the pace of those reductions have lingered on Wall Street as traders brace for a potentially not-so-friendly US inflation report later this week.
Asian equities are poised to follow Wall Street's lower trajectory on Tuesday, with stock futures in Japan, Hong Kong, and Australia all slipping. This comes as investors are concerned that the looming key US inflation report may derail the pace of anticipated Federal Reserve rate cuts.
The focus now shifts to how aggressive the Fed may be in its policy adjustments. While signs of a slowing labor market currently appear to be outweighing inflation concerns, the central bank has not abandoned its 2% inflation target. Policymakers are grappling with inflation that remains above their goal and a labor market showing signs of weakness, creating an unnerving reality that pulls policy in opposite directions.
The upcoming Nvidia earnings report will be a crucial test for the market, as investors hope the tech giant can soothe fears about AI spending and confirm that the stock market's latest rally is not just a technology bubble.
