All Eyes on US Inflation Today: What’s About to Happen?

The Latest on US Inflation Data and Market Expectations

The July inflation rate in the USA, set to be released at 14:30 Italian time, is the key macroeconomic event of the day.

Investor focus has shifted to when the Federal Reserve could start cutting interest rates, with hopes rising that a positive consumer price report could pave the way for a September easing.
This is a crucial issue as it directly impacts the global markets, given the USA’s status as a leading economic power.

Last week, weaker economic data in the USA triggered concerns of a looming recession, causing market turmoil.
While calm has been restored, further cooling of inflationary pressures would be welcome.
If the Federal Reserve proceeds with a rate cut in September, it could provide a boost to the economy.

Market Anticipation of US Consumer Price Data

Consumer and business sentiment about high prices in the USA has been mixed, but recent data signals a shift.
The latest Producer Price Index (PPI) report for July suggests that earlier inflation spikes are now tapering off.

The PPI, considered a wholesale inflation indicator, showed a modest 0.2% price increase in July and a 2.2% rise compared to a year ago, nearing the Fed’s 2% target.
This aligns with market expectations for a rate cut.

Economists predict that the Consumer Price Index will also reflect a 0.2% increase, with year-on-year rates at 3% and 3.2%, below previous highs but still above the Fed’s target.
Expectations are for both overall and core inflation (excluding food and energy) to rise by 0.2% in July.

Investors are anticipating a Fed rate cut in September due to weakening inflation and labor market conditions, with focus on the upcoming data.

Market Reactions and Future Outlook

Jim Baird, Chief Investment Officer at Plante Moran Financial Advisors, predicts a swift Fed easing at the September meeting given labor market softness and diminishing inflation.
Market confidence hinges on the Fed’s reaction to today’s inflation figures.

Markets are pricing in a certain Fed rate cut at the September 17-18 meeting, with debates on the extent of the cut.
Futures prices suggest a split between a quarter-point and half-point reduction, with strong expectations for a full percentage point cut by year-end.

Overall, the markets are eagerly awaiting the inflation data release, which will likely set the tone for Federal Reserve policy moves and global market reactions.