5 days ago
US inflation rises in July, in line with expectations
NEW YORK (Reuters) -U.S. consumer prices increased moderately in July, though rising costs for goods because of import tariffs led to a measure of underlying inflation posting its largest gain in six months.
The consumer price index rose 0.2% last month after gaining 0.3% in June, data showed. In the 12 months through July, the CPI advanced 2.7% after rising 2.7% in June. Economists polled by Reuters had forecast the CPI rising 0.2% and increasing 2.8% year-on-year.
Excluding the volatile food and energy components, the CPI rose 0.3%, the biggest gain since January, after climbing 0.2% in June. The so-called core CPI increased 3.1% year-on-year in July after advancing 2.9% in June.
MARKET REACTION:
STOCKS: U.S. stock index futures were steady after the CPI data. The S&P 500 E-minis were slightly up on the day.
BONDS: The yield on benchmark U.S. 10-year notes slipped 1 basis point to 4.263%.
FOREX: The dollar index fell 0.3% to 98.209, while the euro rose 0.3% to $1.1644
COMMENTS:
BEN LAIDLER, HEAD OF EQUITY STRATEGY, BRADESCO BBI, LONDON:
"The market is taking a lot of comfort from the headline number, which came in a little bit lower than expected. On the face of it, it's validating this overwhelming consensus for a Fed rate cut in September, however we:re a bit cautious on that."
"When you look at the core number, it's maybe not as much as a slam dunk as the market may think. We don't think this report is quite as good as the market maybe initially taking it out. We're going to get a lot more information at the Jackson Hole Symposium where we're going to get some guidance from Powell as to what's going to happen in September."
"The market is going to continue to overwhelmingly price this September cut. The odds are not quite as firmly stacked as the market would think. When you scratch the surface, the core inflation number, which the feds focus is not as good a reading as the headline number. That said, the Fed is going to come under an awful lot of pressure to give some guidance at Jackson Hole and the market will be very disappointed if you don't get a September cut."
JUAN PEREZ, DIRECTOR OF TRADING, MONEX USA, WASHINGTON:
"Thus far it looks like the U.S. dollar is down as a result of CPI coming in basically just as expected. Markets seem eager to price in more than just one interest rate reduction for the year, but these numbers suggest inflation remains growing though at a slow pace."
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, BROOKFIELD, WISCONSIN: (VIA EMAIL)
"The core message in core inflation is that any tariff-induced inflation is likely to be a process, not an event. Eventually, tariffs can show up in varying degrees in consumer prices, but these one-off price increases don't happen all at once. That will confound the Fed and economic commentators for months to come. As long as breakeven inflation rates and other market based measures of inflation expectations stay contained, the Fed should feel comfortable enough to recommence cutting in September."
(Compiled by the Global Finance & Markets Breaking News team)
