Inflation Data Shows Signs of Cooling in July
Inflation continued to cool in July, with the latest government data showing consumer prices rose just 0.2% from June to July. This comes after prices fell for the first time in four years the month before. The U.S. Bureau of Labor Statistics reported that the annual increase in July was down from 3% in June, marking the smallest increase in the 12 months since March 2021. The government noted that nearly all of July’s growth came from rising rental costs and house prices.
Implications for the Federal Reserve
Chief U.S. economist Rubeela Farooqi noted that the inflation data was in line with expectations, providing confidence to the Federal Reserve that inflation is moving towards a sustainable 2%. This has opened the door to a potential rate cut as early as next month. The Federal Reserve has been raising interest rates to curb inflation, but the unexpectedly weak July employment report has led to speculation that the central bank may cut its benchmark interest rate at the upcoming September meeting. The goal is to take moderate measures to address inflation concerns without causing panic in the financial markets.
Concerns About Inflation Risks and Recession
While inflation has been a top concern, the weak jobs report in July has heightened worries about inflation risks potentially leading to a recession. Economists and investors are closely watching for any signs of economic downturn and the impact of high interest rates on the labor market. The situation remains fluid, and market reactions to upcoming Fed decisions will be closely monitored.
–This is breaking news and will be updated.
