U.S. inflation data cooled, and major brokerages remained unchanged on the Fed's interest rate cuts

(1) After weaker-than-expected U.S. inflation data boosted hopes of a soft landing for the economy, the world's top brokerages maintained their expectations for the timing of the Fed's interest rate cut this year. (2) JPMorgan Chase & Co. and Goldman Sachs expect the Fed to start cutting interest rates as soon as July, while Morgan Stanley, UBS Wealth Management, Bank of America and Deutsche Bank expect the Fed to cut rates in September or December. (3) Expectations of interest rate cuts this year have boosted demand for equities, which were sluggish in 2023 when high borrowing costs weighed on corporate valuations and forced consumers to rein in spending. (4) April's inflation data once again strengthened confidence in interest rate cuts, with most long brokerages keeping their forecasts unchanged while awaiting more long data. This is in stark contrast to March, when red-hot inflation data prompted brokerages to push up their expectations for the first rate cut of the year into December, with some even predicting no rate cuts. (5) Data on Wednesday showed that U.S. CPI rose less than expected in April, which could encourage policymakers who wait for new developments in inflation before drop borrowing costs. (6) According to the Chicago Mercantile exchange (CME)'s FedWatch tool, market participants believe that the probability of a Fed rate cut in September is about 70%. (7) Bank of America Global Research economists said in the report, "After a worrying quarter, the April consumer price index took a step in the right direction... However, a report is unlikely to give the Fed enormous confidence." (8) Rick Rieder, chief investment officer at BlackRock Global Fixed Income, said: "It's still hard to see [an improvement in inflation] lately, but stabilising is encouraging and reinforces the Fed's desire to still cut rates this year and continue to cut rates twice in 2024"