U.S. inflation eases slightly in July as gasoline prices fall

The U.S. consumer price index rose 8.5% year-on-year in July, the annual pace slowed compared to June, as inflationary pressures eased due to lower oil prices.

CPI data released on Wednesday showed no gains between June and July, compared with a monthly gain of 1.3% a month ago. On an annual basis, the CPI slowed from a 9.1% gain in June.

Both figures were better than economists’ expectations for CPI growth of 0.2% monthly and 8.7% annually, but average inflation remained near 40-year highs.

These figures are unlikely to represent a shift large enough to stop the Fed from going ahead Actively tighten Monetary policy curbs inflation.

The core measure of the CPI — which strips out more volatile food and energy prices and is most closely watched by the Fed — recorded a monthly gain of 0.3%, down from 0.7% in June. But on an annual basis, it grew at a constant rate of 5.9%.

Wall Street stock futures jumped after the inflation data, with contracts tracking the S&P 500 rising 1.6%. Stocks tracking the Nasdaq 100, which includes technology stocks more sensitive to changes in interest rate expectations, rose 2.2%.

U.S. government bonds also rose, with the 10-year U.S. Treasury yield, a proxy for global borrowing costs, falling 0.1 percentage point to just under 2.7%. The policy-sensitive two-year yield fell 0.19 percentage point to 3.1%, reflecting a sharp rise in the price of the instrument.

Traders are beginning to expect the Fed to raise interest rates slightly in the coming months. Ahead of the report, futures markets expected the central bank to raise interest rates to 3.6% by the end of the year. The expectation is now 3.4%. Bets that the Fed will raise rates by 0.75 percentage point at its September policy meeting also fell.

After inflation data is released strong jobs report On Friday, that allayed fears of a near-term recession but suggested the Fed is working to cool an overheating economy.

It comes as President Joe Biden’s administration and congressional Democrats have been celebrating passed the Senate The $700 billion climate, tax and health care bill is a key pillar of the president’s economic agenda.

Although they are calling it the Inflation Reduction Act, it is not expected to have a significant impact on prices in the short term. However, some measures are aimed at lowering costs in the medium and long term, including provisions that allow the government to negotiate the price of prescription drugs.

Additional reporting by Harriet Clarfelt in London

Source link