US inflation eases, Fed seen destined to cut rates next
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The news: Annual US consumer inflation eased in July, reinforcing expectations that the Federal Reserve will decide to cut interest rates at its mid-September meeting.
The numbers: The Bureau of Labor Statistics (BLS) said the Consumer Price Index (CPI) rose 2.9% from a year earlier, down from June’s 3%. Core CPI, which excludes food and energy, increased 3.2%, a slight decline from June’s 3.3%.
The monthly increase was 0.2%, in line with economists’ expectations. Shelter costs, which rose by 0.4%, accounted for nearly 90% of the CPI's increase.
The context: Economists expect the Fed will cut rates by a quarter-percentage point in September, although a half-point cut is still possible if labour market data released before the Fed’s meeting weakens. The unemployment rate rose to 4.3% in July, sparking concerns about an economic slowdown.
What they said: "The relay race to Fed cuts is on," Lindsay Rosner of Goldman Sachs Asset Management was quoted by Reuters as saying.
"The Fed is on track to cut some amount in September, and we've got two more legs of this race to go," she added, referring to inflation and jobs data due before the central bank's 17-18 September meeting.
The sources: US Bureau of Labor Statistics , Bloomberg , Reuters
