US Inflation Rate Decelerates as Fed Interest Rate Hike Odds Fall

The US inflation rate decelerated slightly in July, according to data released by the US Bureau of Labor Statistics. The year-on-year headline inflation rate decreased from 3.5% in June to 3.4%, matching analysts' expectations. This easing was primarily driven by a decrease in gasoline prices, which moderated from 26.7% to 24.6% YoY over the period.

The Federal Reserve's interest rate hike probability fell to 40% after the data release, down from over 50% in previous days. Market consensus now assigns a 60% likelihood of maintaining the benchmark interest rate at 3.75%. The shift in market expectations occurred amid moderating inflationary pressures and a weak employment report released earlier in the month.

The Dow Jones Industrial Average declined marginally by 0.04% to 53,775 points following the economic release, diverging from the S&P 500 and Nasdaq 100 indices, which both advanced. This divergence reflects underlying consensus uncertainty ahead of the Fed's forthcoming monetary policy decisions.