“Today we have the most popular ingredient this week.” It is the July US consumer price index that will be announced. The market forecast is expected to slow down from +9.1% in the previous year to +8.7% from the previous year. On the other hand, the core year-on-year growth is expected to be +6.1%, which is a further increase from +5.9% in the previous survey. Inflation is heating up in the short term, with recent results surpassing market expectations. On the other hand, there are also those who point out that gasoline prices have stabilized, and that inflation expectations have fallen assuming a slowdown in the economy in the near future.
The market is concerned about the rate hike at the next FOMC meeting in September. At present, the CME FedWatch is pricing in a 0.50% rate hike at 30.5% and a 0.75% rate hike at 69.5%. The number reflects last weekend’s strong U.S. jobs report.
Just as the Biden administration has made inflation countermeasures the most important issue in the run-up to the midterm elections, the impact of inflation on the American people is considerable. A modest slowdown in inflation might reassure the market, but it would not change the current state of people’s lives. The government’s pressure on the US Fed to fight inflation is assumed to be substantial.
In the event that inflation growth slows down, how much will the market react to the 0.75% factoring rate? Today’s US consumer price index is certainly an important factor ahead of the Jackson Hole meeting in late August.
Today, I would like to follow the flow of the USD after the US Consumer Price Index. Waiting for result.