U.S. inflation pressures eased again last month, but the overall softening might not be significant enough to justify an outsized interest rate cut from the Federal Reserve next month in Washington.
The Commerce Department said its headline Consumer Price Index for the month of July was pegged at an annual rate of 2.9%, down from the 3% pace recorded in June. and the lowest since March 2021.
On a monthly basis, price pressures edged 0.2% higher, thanks in part to a modest 4 cents per gallon increase in domestic gasoline prices,
So-called core inflation, which strips out volatile components like food and energy, slowed to an annual rate of 3.2%, the lowest rate in more than three years and matching Wall Street’s 3.2% forecast.
The monthly reading of 0.2% also matched Wall Street forecasts and was up modestly from the final June reading of 0.1%.
“Clearly there is some concern that the economic slowdown in the US is more severe than is currently being presented by the data. This has caused market jitters of late, but investors should be calmed knowing that rate cuts are coming,” said Richard Carter, head of fixed interest trading at Quilter Cheviot.
“However, where there is still a disconnect, as there was at the beginning of the year, is in the expected pace of these rate cuts,” he added. “The market is potentially getting ahead of itself once again and expecting more cuts than will necessarily be delivered.”
U.S. stock futures were active in the wake of the inflation data, with the S&P 500 called 9 points higher while the Nasdaq was called 20 points to the upside. The Dow Jones Industrial Average, meanwhile, is priced for a 10-point gain.
Benchmark 10-year Treasury note yields rose 2 basis points following the data release to change hands at 3.856% while 2-year notes were pegged 3 basis points higher at 3.977%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.84% lower at 104.171.
The CME Group’s FedWatch now suggests a 43.5% chance of a 50 basis point interest rate cut from the Fed when it meets next month in Washington, down from around 52.5% prior to the data release. The odds of a 25 basis point reduction are pegged at 56.5%.
Source: https://finance.yahoo.com/news/cpi-inflation-report-upsets-betting-124546681.html
