Inflation was lighter than forecasted last month, according to data released Tuesday morning, as Wall Street pays close attention to weakening which should bolster the case for the Federal Reserve to lower interest rates.

Investors were looking for the inflation data to "land in a sweet spot -- cool enough that no one will be second-guessing the likelihood of a September rate cut, but warm enough to push aside the recession concerns that have rattled the markets recently," summarized Chris Larkin, E*TRADE from Morgan Stanley's head of trading and investing, in emailed comments earlier this week.

As Larkin alluded to, the latest CPI release comes at a particularly pivotal time for the U.S. economy and financial markets. With inflation well below its peak and nearing the historic 2% target, many are eagerly anticipating the Fed to make its first rate cut since March 2020, a move which would likely stimulate broader economic growth as borrowing costs of all shapes and sizes grow less expensive, officially ending the monetary tightening cycle kicked off in 2022 to combat inflation. But concerns about whether the Fed held rates too high for too long and let the U.S. slip into a recession came to a head earlier this month, as the July employment report revealed far weaker job growth and far higher unemployment than economists expected, causing a major stock market selloff amid concerns about a potential recession. That anxiety eased in recent days, however, as last week's new unemployment claims were better than expected, as was Tuesday's wholesale inflation report, a less cited measure which tracks how much goods producers pay for materials.