The US CPI report is due at the bottom of the hour and eyes will be on the ongoing creep higher in Treasury yields. The front end is indicating that the front-loading of rate cuts along with good economic data will lead to a soft landing.
The question is: When do you price out a recession and start pricing in reflation? Right now, the market is dabbling with a terminal rate near 3.35%, which implies halting the cutting cycle next summer. Given the strength in the labor market, that's hard to argue with but rates that high could further stall the housing market and should start to weigh further on growth.
I think the factor that will ultimately matter is government spending, which is running around 7% of GDP. If Congress can reign that it (unlikely but depends on the election) then rates can come down.
