Fed Rate Hike Bets Cool as BOJ Expectations Rise on Inflation

Market expectations for a September Federal Reserve rate hike have cooled down following the release of US inflation data and July nonfarm payrolls. The data showed that US CPI rose by 0.1% in July, while core CPI increased to 2.5% year-over-year.

This softening of market pricing has been attributed to the more subdued inflation numbers, as well as the lower-than-expected job growth in July. In contrast, Japanese wholesale inflation data showed a significant increase of 7.2% year-over-year in July, reinforcing expectations for a possible September BOJ rate hike.

The divergence in market reactions between the US and Japan reflects the varying economic conditions in these countries. The US economy is showing signs of moderation, while Japan's economy remains under pressure from inflation and a weak yen.