Fed Holds Tight Despite Easing US Inflation Concerns
US inflation concerns have eased slightly following the recent Consumer Price Index (CPI) report, but risks still remain. According to UOB's Alvin Liew, while headline and core CPI continue to move lower, they are still above the Federal Reserve's 2% target.
The Fed is expected to keep interest rates on hold through 2026 before starting gradual rate cuts in 2027, as inflation gradually eases. The risk of external shocks, particularly energy prices and geopolitical developments, remains a concern for the CPI outlook.
Liew notes that while the July CPI report reduced immediate concerns about persistently high US inflation, it is too early to declare victory over inflation. The resumption of disinflationary trends will likely be uneven and susceptible to external shocks.