New economic data rejects Trump’s 350bps rate cut dream as Bitcoin falls while stocks climb
US services inflation stayed elevated in August, complicating expectations for the Federal Reserve as markets look for a September policy adjustment.
The likelihood of a small 25bps cut is now increasing, which is likely to anger President Donald Trump, who has advocated for a mammoth 350bps cut.
The ISM Services Prices Index registered 69.2, only slightly below the prior month’s reading, while new orders strengthened to 56.0 from 50.3. Employment contracted for a second month at 46.5, pointing to softer hiring conditions.
Broader economic data offered a mixed view. Nonfarm productivity in the second quarter was revised up to 3.3%, while unit labor costs dropped to 1% from 6.9% in the previous quarter.
Weekly jobless claims ticked higher to 237,000, with continuing claims steady near 1.94 million. The trade deficit widened to $78.3 billion in July as imports climbed to $358.8 billion against exports of $280.5 billion.
Earlier this week, the Fed’s Beige Book described a stable economy with modest price growth and business uncertainty tied to tariffs and policy outlooks, reinforcing expectations of a measured quarter-point cut in September.
San Francisco Fed President Mary Daly stated she does not support a 50 basis point move, backing gradual easing instead. Market odds have priced a near-certain reduction in the policy rate.
Bitcoin traded lower today, moving from $110,000 to $109,300, while the S&P 500 ETF gained 0.3% from 644 to 646. The divergence reflected caution in digital assets and steady demand for equities as rate expectations centered on a modest cut.
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