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The market reaction to that CPI print coming in mainly in line with expectations. Markets now pricing in about a 60% chance of a 25 basis point cut this September versus a 40% chance of a 50 basis point cut as Jennifer was just mentioning. Here to discuss how investors are positioning around potential Fed moves, we've got Krishna Guha, he is the vice chairman of Evercore ISI. Krishna, great to have you. So, as I mentioned this morning, traders were pricing in prior to the print about a 50/50 shot of 25 or 50 basis points of cuts to come this September. Do you see evidence today of the need for a 50 basis point cut?

Well, the as your reporter said exactly right, it's the labor data that's going to determine whether we get a 50 or a 25 in September. Today's inflation data doesn't meaningfully move the needle either which way on that. You know, it was just reported a decent read overall, some of the compositional stuff with that shelter inflation being a bit sticky, not great. Net net, didn't make a difference to the 25 versus 50 basis point debate, fractional at best. Maybe that stickiness in housing means it's just fractionally less likely we get a 50, but the way I think about it, it's the labor data that's in the driver's seat. That's going to determine it. We have to wait and see what we get there.

So then Krishna, if we do get another weak report, maybe one that's similar to what we got last month, is that going to be enough then if the emphasis should be and is on the labor market at this point, is that enough then to justify a 50 basis point cut?

Yeah, for sure. So I I don't think it's all that complicated. I think if the coming labor market data is a bit better than July but still softening as a trend, you're going to get 25s at every meeting this year and carrying on into next year every meeting as needed in Q1. But if the next prints are as weak as July, you're going to have the Fed come out the gates with likely 250s to try to get ahead of the curve on labor market softening.

Christian, as it stands right now and the econ data that we have gotten, yes, there are certainly signs of the economy weakening, but overall, we are in a much better place than maybe many of the forecasters had expected at this point. What would you say the probability here is of a recession and I guess to what degree maybe could it materially get worse if we do see another weaker data print?

So I view the data that we've been seeing as consistent with a bumpy soft landing, not likely anything more troubling than that. I would put a soft landing as still a 70%, maybe 75% type probability at this juncture. It's clearly not 90 or 100%, right? There's a reason why soft landings are not that common. Uh they're not that easy to pull off. And it's always a delicate act here because you know, if you're the Fed, you wanted to slow down the economy a bit. You certainly wanted to cool off the labor market a bit. You've now got about the amount of cooling off in the labor market that you wanted. Um but it's a delicate act here now, um you know, making sure that you don't get more labor market cooling than you wanted. I do you think that that calls on the Fed to be nimble, to be forward leaning. What I have tried to emphasize in my own work is that at this juncture the Fed should not be waiting for bad labor data, trying to get ahead of bad labor data, trying to be more proactive, more forward leaning. But I do think that you know, the initial reaction to the July employment report was overdone. We understand it was not a great print, but as I think everyone's come to appreciate better, that market response also driven by that perfect storm of the AI reversal, the Yen carry trade unwind and that bad data. It wasn't a clean read on the economic prospects for the US. Bumpy soft landing is still the right baseline.