Consumer Price Index Meets Expectations
July’s Consumer Price Index (CPI) showed a 0.2% monthly increase, aligning with economists’ forecasts. The 12-month inflation rate came in at 2.9%, slightly below the anticipated 3%. Core CPI, excluding food and energy, rose 0.2% monthly and 3.2% annually, meeting expectations. These figures suggest that inflationary pressures may be easing, potentially giving the Fed room to consider monetary policy adjustments.
Treasury Yields and Rate Cut Probabilities
U.S. Treasury yields saw a slight increase as investors digested the inflation data. The CME FedWatch Tool indicated a 100% probability of a rate cut in September, with traders split between a 25 or 50 basis point reduction. This shift in expectations follows Tuesday’s softer-than-expected Producer Price Index (PPI) data, which showed a 0.1% monthly increase against a forecast of 0.2%.
Impact on Other Currencies
Sterling eased after UK inflation data came in lower than expected, rising 0.2% to $1.28415. The softer inflation figures led to increased speculation about potential Bank of England rate cuts, with financial markets pricing in a 44% chance of a quarter-point cut in September, up from 36% before the data release.
