Modest US Inflation Rise Eases Rate Hike Bets
US inflation rose modestly in July, matching economists' expectations and potentially reducing the urgency for the Federal Reserve to raise interest rates next month. The Consumer Price Index increased 0.1% from the previous month, while core CPI, which strips out volatile food and energy prices, rose 0.2%. These readings matched estimates.
The annual inflation rate remains high, with headline CPI increasing 3.4% and core inflation rising 2.5%, both of which are well above the Federal Reserve's 2% target. However, some price pressures seen earlier in the year may be losing momentum.
Energy prices fell 1.5% in July, driven by declining gasoline costs. Despite this drop, energy prices remain substantially higher than a year ago, with the energy index up 14.7% over the past 12 months and gasoline prices increasing 24.6%. The Federal Reserve will continue to assess whether inflation is genuinely moving towards its target.
The latest data may give Fed policymakers additional time to evaluate the situation before making any decisions on interest rates. US stock futures ticked higher following the inflation report, with S&P 500 futures up about 0.5% and Nasdaq futures rising roughly 1%. Steve Ryder, senior fixed-income portfolio manager at Aviva Investors, stated that the report is unlikely to trigger an immediate policy shift.
Ryder added that the data should keep expectations of a September rate hike alive but would provide little urgency for the Fed to act immediately. Jobs data remains key in determining the next move by the Federal Reserve.