The Consumer Price Index (CPI) rose 2.9% year-over-year in July, the lowest increase since 2021. Willett Advisors LLC Chairman and CEO Steven Rattner joins Market Domination to discuss the print and what it signals about the state of the economy as Wall Street awaits an interest rate cut from the Federal Reserve.

Rattner believes July's CPI report certainly gives the Fed "scope to cut rates," yet, even with the upcoming July's Personal Consumption Expenditures (PCE) report, the economy still isn't at the 2% inflation target. He believes that there is a "very strong argument" for the US central bank to cut rates as the economy "is very clearly slowing down." Whether that slowdown is the beginning of a recession is still unclear:

"It is very, very hard to not just predict turns in the economy, whether it's up or down, but actually see them in real-time. And it's very often that you don't even know you're in a recession until you're well into it. Or sometimes even out of it, and vice versa. So I think that we have to be very careful to be sure that the economy has hit a soft landing. And as I said, I think it could go either way at this point."

While he believes that "predicting markets is somewhere between difficult and impossible," there are key ways in which the Fed's decisions impact markets.

"What the Fed does, both in terms of liquidity in the markets and perhaps, more importantly, interest rates and the rates on alternative investments like fixed income securities, are important determinants of the stock market," Rattner explains. So, markets are likely to go up if and when the Fed cuts rates in September: "What has been propelling the market is a belief that inflation is coming down and rates will come down with it."

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This post was written by Melanie Riehl