US Inflation Optimism Offset by Middle East Uncertainty
Global markets have welcomed moderate US inflation data released this week, while strong corporate earnings fueled risk appetite. However, continued uncertainty over efforts to reach peace in the Middle East limited optimism.
The US Producer Price Index (PPI) remained unchanged month-on-month but rose 4.7% on an annual basis in July, below estimates. The ongoing decline in energy prices also strengthened expectations that forward-looking price pressures could ease.
Expectations for Fed rate hikes were pushed back to December as the New York Stock Exchange closed at record highs and the US Dollar Index eased below the 100 threshold. Cleveland Fed President Beth Hammack reiterated that rate hikes are needed to bring down persistently high inflation.