Inflation Slowdown Reduces Fed Rate Hike Bets

The US annual inflation rate slowed for the second consecutive month to 3.4% in July 2026, from 3.5% in June, as expected.

Core CPI, which excludes volatile food and energy prices, rose 0.2% on a monthly basis and 2.5% year over year, down from 2.6% in June.

The benign inflation report combined with disappointing jobs data to reduce the urgency for the Federal Reserve to raise interest rates at its September meeting.

Growth-oriented investments, particularly technology, semiconductor, and AI-themed funds, could benefit from a reduced risk of further rate hikes.

Emerging market ETFs like EEM may outperform as the macro environment becomes more supportive due to cooling US inflation and a weaker dollar.