Fed is on track to cut rates in October and December, says Evercore's Krishna Guha

Inflation Analysis - Inflation is described as benign for markets, with the latest print coming in cooler than expected at 3%, although it remains above the Fed's target rate [1][2] - There is no indication of a surge in goods prices due to tariffs, with goods price inflation lower than the previous month [2] - Housing services inflation is reported to be soft, while other services show slightly elevated inflation, but overall, there are no significant concerns [3] Labor Market Dynamics - The Federal Reserve is closely monitoring labor softness and risks, with recent layoffs, such as Target's 8% corporate staff reduction, being the first in a decade [4][5] - The Fed is cautious about interpreting single company layoffs, focusing instead on aggregate data, particularly initial unemployment claims, which have remained stable [6] - The ongoing government shutdown is affecting federal employment, with potential furloughs and paychecks being delayed, which could impact the labor market and demand side [7][9] Government Employment Impact - The labor market is influenced by federal and state employment dynamics, with anticipated effects from previous layoffs and furloughs expected to create noise in unemployment data [8][10] - The Fed and economists are prioritizing the analysis of private sector payrolls to understand the underlying labor market trends amidst government employment issues [10][11]