Because America breathes a sigh of relief with the latest inflation data
Inflation slows the rush in the United States. Consumer prices rose by 8.5% in July, less than the 8.7% expected by analysts. Facts, numbers, comments and market reactions
The cost of living in America decelerates and the markets breathe a sigh of relief.
Inflation slows the rush in the United States. Consumer prices rose 8.5% in July, less than the 8.7% expected by analysts and 9.1% in June. The slowdown in inflation is linked to the drop in gasoline prices and air fares.
The price rush in the United States slows and analysts are betting on a 0.50% rate hike by the Fed in September, lower than the initially estimated 0.75%. The slowdown in inflation is good news for the American central bank but, it is the belief, a dovish Fed cannot yet be predicted. Prices, although slowing down, continue to remain at the highs of the last 50 years, indicating that, in all probability, the central bank will continue its battle against inflation.
Here are all the details and the first comments.
HOW INFLATION GOES
On a monthly basis, consumer prices remained unchanged, while the core index – the one excluding food and energy and monitored by the Fed – recorded a cyclical increase of 0.3%. The slowdown in prices, which in any case remain not far from the highs of the last 40 years, is good news for the White House and the Fed, which are at the forefront of the fight against inflation.
DATA ANALYSIS
A lower than consensus estimate for July inflation gives wings to the opening Wall Street indices. Investors are now hoping that the high price spike has passed, and that this may prompt the Federal Reserve to adopt milder policies regarding interest rate hikes. The Dow Jones gained 1.4% in the early stages, the S&P 500 there 1.6% and the Nasdaq 2%. You also buy on bonds, with the 10-year Treasury yield dropping to 2.75%. Strong strengthening of the euro against the dollar (+ 1%) at the exchange rate of 1.0322.
THE RISE OF THE MARKET
It was the publication of the July inflation report that gave the boost to the markets. In particular, the cost of living in the United States remained unchanged on a monthly level and grew by 8.5% on an annual basis in July, compared to the + 0.3% and + 8.9% expected by the consensus of economists. The core consumer price index, the one that is most closely monitored by the Fed, and which excludes food and energy, rose by 0.3% at the cyclical level and increased by 5.9% annually, against +0, 5% and + 6.1% predicted by the experts.
THE COMMENT OF THE ANALYSTS
Inflation in July, in addition to being lower than the consensus, is also much lower than the 9.1% in June. Investors now appear confident that the Fed, which has placed the fight against rising consumer prices as a priority of its aggressive monetary policy, will partially retrace its steps, adopting softer measures regarding the rate hike. 'interest. "Inflation has probably exceeded its peak", the economists of Commerzbank point out, but they point out that "the collapse in the price of gasoline has played a decisive role: the further decline in the rate of inflation will therefore probably be slow".
THE ANALYSIS OF GENERALI INVESTMENTS
Paolo Zanghieri, Senior Economist of Generali Investments, commented : “ Energy and commodity prices remain the key drivers of inflation, hence the easing of the consumer price index in the US – while reducing fears of too many moves aggressive by the Fed – does not represent a turning point for monetary policy. The deceleration in the core rate is a tentative indication that we may be near the peak of inflation, but rents continue to rise at a very rapid pace and it will take some time for the cooling in house prices to affect this key component of the consumption basket. So the descent to a reasonable rate of inflation will take months. Despite this moderately good news, the task for the Fed remains very difficult: last week's excellent employment numbers and continued signs of wage growth show that the labor market remains extremely positive. The limited and uncertain progress on the inflation front visible in the newly released data is not enough for the Fed to move towards a much less aggressive pace of normalization. Our base scenario remains a 50bp hike in September, with some risk of a repeat of the 75bp hike recorded in July ”.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/perche-lamerica-tira-un-sospiro-di-sollievo-con-lultimo-dato-sullinflazione/ on Wed, 10 Aug 2022 14:02:27 +0000.