US inflation has hit a three-year low

VaselineAugust 15, 2024

0 1 minute read

The U.S. consumer price index (CPI) rose 2.9% year-on-year in July, down a notch from 3.0% in June, which was also the market estimate. This marked the lowest US inflation rate since March 2021, when inflation began its rise, which took it to 9.1% in June 2022. Notably, headline CPI fell for the fourth consecutive month . On a monthly basis, the CPI rose 0.2% in July, in line with the market estimate and from -0.1% in June. Almost all of the monthly increase was due to higher housing costs.

The core CPI, which excludes food and energy and is closely watched by the Federal Reserve, fell to 3.2 percent in July, just below June’s reading of 3.3 percent, which was also the market estimate. On a monthly basis, the core CPI rose 0.2%, above June’s gain of 0.1% and in line with the market estimate.

Fed to reduce, but by how much?

Today’s data confirmed expectations of a slowdown in US inflation and boosted market expectations for a 50 basis point cut at the Fed’s next meeting on September 18. point reduced to 40%.

The likelihood of a 50-point cut has increased in recent weeks as the US released weaker-than-expected data that sent global markets into a tailspin last week. The Fed is virtually certain to offer an initial rate cut next month, with the only question being the size of the cut. This key question may remain unanswered until the rate decision is announced.

US dollar shrugs after inflation report

Today’s inflation report was in line with expectations, and the US dollar’s response was muted, with small losses against major currencies.

The EUR/USD currency pair rose 0.15% following the inflation report and the GBP/USD currency pair rose 0.10%. Other major currencies also posted small gains against the US dollar.