In July, the US consumer price index (CPI), which excludes food and energy, rose 0.2% from the previous month. Growth remained low following June. It further bolstered hopes that the Fed will be able to calm inflation without triggering a recession.
U.S. CPI core index slows for 2nd straight month, hopes for subduing inflation (3)
Market players’ views on the CPI data for July are as follows.
◎Michael Kontopoulos, Director of Fixed Income, Richard Bernstein Advisors (RBA):
Another CPI data will be released by the next US Federal Open Market Committee (FOMC) meeting, but if we look only at the data for July, it will strengthen the grounds for skipping the rate hike. Even more striking in today’s data is the surge in unemployment claims after a period of good performance. It is no coincidence that inflation is easing as the labor market continues to slow (albeit at a very sluggish pace).
Gurpreet Gill, Global Fixed Income Macro Strategist, Goldman Sachs Asset Management:
The details of July’s CPI data are generally in line with the slowdown in inflation. The Federal Reserve has stressed that September’s policy decisions will depend on the totality of data accumulated between now and the Fed’s meeting. While the data support our view that the rate hike cycle likely peaked in July, we will continue to monitor the core personal consumption expenditure (PCE) price index to see if the trend of decelerating inflation persists. We will continue to monitor developments and the rebalancing of the labor market.
◎ Seema Shah, Chief Global Strategist, Principal Asset Management:
The grounds for the September deferment have strengthened. Both the headline and core indices are down, with the breakdown also suggesting further downward pressure in the coming months. But while inflation is headed in the right direction, it remains high and the Fed is still some distance away from cutting interest rates. On the contrary, inflation is unlikely to slow smoothly, and it will be more painful before the 2% inflation target remains within range.
◎George Mateo, Chief Investment Officer (CIO) of Key Private Bank:
The latest inflation numbers are a reminder of the good old days. Both the overall and core inflation rates rose by 0.2% from the previous month, and it can be inferred that the impact of inflation caused by the novel coronavirus pandemic has faded. As a result, the Fed may reinforce the feeling that it has successfully landed, and will likely postpone the rate hike in September as planned. That said, in our view there is still considerable momentum in the economy and, as announced last week, wage growth is still solid. So, while there may be a pause in rate hikes, it won’t turn to rate cuts any time soon.
Original title:Stocks Rise as CPI Bolsters Bets on a Fed ‘Skip’: Markets Wrap (excerpt)
2023-08-10 16:08:00
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