(Reuters) – The U.S. Labor Department’s seasonally adjusted consumer price index (CPI) was flat in July, according to a release on Wednesday. This was due to a 20% drop in gasoline prices. Market expectations were for a gain of 0.2%. Compared to the same month last year, it rose 8.5%, falling short of expectations. It was up 9.1% in June.
Here are the views of market participants:
●Need to reduce to 6% level
Inflation likely peaked in June. But is inflation converging fast enough for the Federal Reserve to consider it good enough?
I stand by my view that the Fed sees inflation needing to drop 3 percentage points from its peak. The peak was 9.1%. Inflation needs to fall to at least the 6% range for the Fed to consider it significantly lower, but it has only dropped to 8.5% so far.
Possibility of slowing pace of interest rate hike in September
The tide of inflation seems to be finally turning. The CPI data alone may not be enough for the Federal Reserve to act, but at least it shows the pace of rate hikes in September could slow.
This is how the US CPI looks: It’s too early to assert that inflation will slow down
It was quite a surprise and the market reacted positively. But it’s too early to say it’s solid evidence that inflation is weakening. On the other hand, if the numbers are not revised this time around, it will definitely be good news for the economy.
You seem to be overreacting to one piece of data. Tomorrow’s US Wholesale Price Index (PPI) may tell a different story.
The Federal Reserve is determined to keep inflation down, and one month of data won’t change that determination. There is a possibility that the figures this time will be revised due to abnormal values.