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U.S. Inflation Slows by More Than Expected in July as Fed Eyes Future Rate Hikes

Published 08/10/2022, 08:26 AM
Updated 08/10/2022, 08:30 AM
© Reuters.

© Reuters.

By Scott Kanowsky

Investing.com -- Inflation in the U.S. eased by more than expected in July, but remains around its highest level in four decades despite aggressive monetary tightening from the Federal Reserve.

The July consumer price index showed an uptick of 8.5% compared with the same month last year, while the reading came in at 0.0% versus June. The figures are down from the prior red-hot rise of 9.1% annually and 1.3% month-on-month in June.

Economists had estimated an annual rise of 8.7% and a monthly increase of 0.2%.

Meanwhile, core CPI - which takes highly volatile food and energy prices out of the index - posted a smaller monthly uptick of 0.3% against 0.7% in June and remained steady at 5.9% on a yearly basis.

The annual deceleration is unlikely to change the narrative for the Fed, which has rolled out a series of large interest rate hikes in a bid to quell soaring inflation. The Fed has previously said that it will need to see several months of declines in CPI growth before it pumps the brakes on increasing borrowing costs.

The central bank still has a set of August economic indicators to mull over ahead of its next rate decision, but investors will be looking for an initial to reaction to Wednesday's data in comments later today from Fed officials Charles Evans and Neel Kashkari.

The fresh inflation print also comes after an unexpected surge in the July labor market report quieted some concerns over a potential recession in the U.S. The strong jobs report bolstered the Fed's argument that its current interest rate path will help keep the world's largest economy from expanding at an unsustainable pace.

The dollar index - which measures the greenback against a basket of other major currencies - was trading down by 0.39% at 105.95 in the wake of the inflation data. Futures for the Dow Jones, S&P 500 and Nasdaq all pointed higher as well.

The yield on the United States 10-Year - a proxy for broader economic and inflation expectations - fell by 0.1% to 2.7%. The United States 2-Year, which is sensitive to short-term rate movements, dropped by 0.17% to 3.12%. Yields tend to move inversely to prices.

Latest comments

Inflation is only down as energy prices came down over the past few months (plus energy prices impact everything even when not included in direct mix). Only a temporary reprice though. Come Oct / Nov energy prices will climb by 20-30% at least as strategic reserves pulls stop, winter hits and the EU increases its energy sanctions versus Russia (most experts saying could well climb again to $120 - $140). Wouldn't go near the stock market until Nov at earliest even if a moronic bull market does start as can see it all collapse come Nov mid terms with market falling back to pre covid levels by this time next year.
TDCHtskYvEBD8yg5nhPQzptmHcXPnDk4oD
US inflation is lower than expected they have the same accountants as China applying Magic now you see it now you don't
No, I still see inflation.  It didn't go down that much.
 You see inflation and so everybody, but the objective got accomplished, to prop the markets. Make belave that's what the magicians do.
tell me where gas is more expensive than a month ago. no where
The FED should always hike double that of opinion poll or expectations As most speculators overplay commodities and they need to be thwarted heavy and it does not matter if they get bankrupt in the process of inflating prices, crude specifically. The common man the unemployed and reirees needs to breathe not allow vested interest take over the economy
That wouldn't work..  Expectations would adjust up if the Fed did that.
Party time!
The next big NEWS to talk about debt delinquencies. GL.
fine
Classic bear market rally pump today pump Thursday dump on Friday...go ahead buy today so you can lose momey.
Unless we'd get another round of insanity to ATHs. Wouldn't be surprised.
Wishful thinking at its best!
It's not wishing.  It happened.
Dow opening more than 300 points. Where are we heading to?
Green day
Biden writing headlines here now?
No
Nice spin! No mention that real wages are down 16 straight months. plus we still have ridiculously high inflation...Pump Stawks on any news!!!
I've ran out of tissue paper
he said real wages
 Use some fiat :)
number was probably manipulated, but even at 8.5% that's just 0.6% less than what we had.  its still a problem and no easing from Fed in sight for next two meetings if not three.
how about you come back to the market when inflation is 2 percent lol. u keep writing the same thing every where.
 the position is consistent, trying to prevent average joes from losing their money with the idea "all is well" when we have more hikes coming and more earnings bad news coming.
Everyoneeeeee was expecting inflation to fall this month (well everyone I know). Just looking at how energy prices have fallen over the past 2-3 months. BUT most expect energy to start rising again in Oct / Nov - so think this may well be a temporary blip down. Do I see Inflation fall from 9%+ yes...but cant see it going much below 5% without the Fed getting even more aggresive.
it's still going up!
yea!! the economy has cancer but its not progressing as fast as it could be!   Yea!! open the champagne!!
yea!!   Core inflation the same as it was last month (high) and CPI is no longner 9.1% just 8.5%  yippee, gonna drive those stocks up on NASDAQ, heck 40x EPS is way to low, I'm going to buy until its 100x!!  yea!! Fed will raise rates by 75bps in September, but that doesnt bother me the retail trader, I'm going to drive stocks up!!  yea!!  slowing economy and higher interest rates!   Stocks to the moon!!  yea!!
core cpi is down :)
Remember, this is still a lot higher than the 2% target
core cpi is down. that settles it.
Ok you win 🤣
core cpi is down. that settles it.
Rally, All in Long ;-)
Ridiculous writer trying to make it sound bad.
it wasn't that great y/y wise all the categories above the average are the ones people actually need bar airline fares whilst thr ones below are mostly discretionary spending baring shelter which takes time to move up due to how to calculate it.
it is still pretty bad.  8.5% inflation is bad.
How is massive inflation a catalyst to push the market up?????
Inflation rises prices...
USD just crashed
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