Investors looking for the Federal Reserve to provide the next catalyst for stocks could be disappointed, particularly if upcoming inflation data doesn’t cooperate. Economists have grown worried in recent days that the economy is slowing. A weak July payrolls report and massive revisions to prior months reinforced the specter of a slowdown that had started to emerge in other data. The result is that markets are now pricing in the strong possibility of an interest rate cut when the Federal Open Market Committee meets again on Sept. 16-17. Traders also see a near certainty of a second cut by the end of the year, and nearly a 50-50 chance of third reduction, according to the CME Group’s FedWatch Tool. “So, we are back to the ‘bad is good’ mantra, with the Fed expected to save the day by cutting rates early and big enough to prevent a recession — something the U.S. President would likely welcome,” Emmanuel Cau, head of European equity strategy at Barclays, said in a Friday note. “However, we are not convinced a September cut is a given, yet.” CPI landmine There are multiple landmines in place between now and the Sept. 16-17 gathering, with next week’s inflation reports the first in focus. The Bureau of Labor Statistics on Tuesday will release the July consumer price index report. That’s expected to show a 0.3% increase on headline CPI and a smaller 0.2% rise in core. President Donald Trump fired the BLS commissioner last Friday after the July jobs report. The July producer price index, considered a gauge of wholesale prices, comes next Thursday. Markets will be looking closely for upside pressure coming from Trump’s tariffs. “A hawkish print would likely be a reality check for markets, and reinforce the current narrow leadership in quality/growth” stocks, Cau said. “On the other hand, a soft CPI print would likely cement rate cuts expectations, lift equities higher and help broadening/Momentum unwind, on top of capping near term dollar upside, in our view.” The strategist still sees “a decent case for equities to grind modestly higher by year end, but the rest of the summer is unlikely to be plain sailing.” Similarly, JPMorgan chief U.S. economist Michael Feroli sees easing monetary policy, likely cutting rates at each of the three meetings through the end of 2025, “before pausing indefinitely.” “It’s not unprecedented for the Fed to ease when stocks are at or near all-time highs. It’s rarer when stocks are at the highs and inflation is above target and inflecting higher,” Feroli wrote.