July's Consumer Price Index (CPI) data came in line with Wall Street estimates, reinforcing expectations of a Federal Reserve rate cut in September. However, the focus has now shifted to the magnitude of this potential cut. Evercore ISI Vice Chairman Krishna Guha joins Catalysts to share his outlook.

Guha emphasizes that upcoming labor data will be crucial, stating it will "determine if we get a 50 or a 25 [basis point cut] in September." While he describes today's CPI data as "a decent read," he notes it doesn't significantly influence the scale of the Fed's potential cut. "It's the labor data that's in the driver's seat," he states.

"I think if the coming labor market data is a bit better than July, but still softening as a trend, you're gonna get 25s [basis point cuts] at every meeting this year, and carrying on into next year every meeting as needed," Guha told Yahoo Finance. However, he adds that a labor report weaker than July might prompt the Fed to implement 50 basis point cuts in back-to-back meetings to get "ahead of the curve."

Regarding the possibility of a soft landing, Guha estimates a 70 to 75% probability, cautioning that "they're not that easy to pull off."

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This post was written by Angel Smith