US Inflation Data Release Sets Stage for Fed's Next Move

The US Federal Reserve is facing a challenging decision ahead of its next FOMC meeting in September. The release of July's inflation data, which is expected to show annual inflation easing to 3.4% from 3.5% in June, will play a crucial role in determining the Fed's action.

Market sentiment is highly sensitive to US inflation rates, and any increase or stickiness in inflation will be viewed negatively. A hot core print could lift the probabilities of a rate hike again and weigh on equities, while a soft number could lower them.

The Fed's committee is already split, with 3 out of 12 members voting for a rate hike in the last FOMC meeting. However, this was before the job market data was released, which showed a decline of 23,000 jobs in July.