Investing.com: U.S. Inflation Unchanged in July, Setting the Stage for Fed Rate Cut
In July, overall annual U.S. inflation remained steady, setting the stage for a potential interest rate cut by the U.S. Federal Reserve in September. According to data from the Bureau of Economic Analysis, the Personal Consumption Expenditures (PCE) price index held at 2.5%, staying flat from the previous month and below the expected 2.6%. Excluding volatile items like food and fuel, the core PCE price index, the Fed's preferred measure of inflation, also remained unchanged at 2.6%, falling below the expected 2.7%. Both figures saw a month-on-month increase of 0.2%.
During the Fed's annual symposium last week, Fed Chair Jerome Powell acknowledged progress in inflation and hinted at the need for policy adjustments. This has led the markets to anticipate a rate cut at the upcoming policy meeting in September, which would be the first cut in over four years. While this level of inflation is not expected to deter Fed policymakers from lowering interest rates from historic highs, it could impact the number of cuts this year, especially following a slight upward revision in second-quarter GDP earlier this week.
Analysis:
- U.S. inflation remained unchanged in July, potentially paving the way for a Fed rate cut in September.
- The PCE price index and core PCE price index both held steady, below market expectations.
- Fed Chair Powell's comments at the annual symposium indicate a shift in policy towards a rate cut.
- The markets are anticipating the first rate cut in over four years at the next policy meeting.
- While inflation levels may not prevent a rate cut, they could influence the number of cuts this year.
- Investors should monitor Fed announcements and market reactions for potential impacts on their finances.