US inflation cools to 3.4%: Is a rate cut coming?
What's the story
US inflation has eased a bit, with consumer prices rising 3.4% year-on-year in July, slightly lower than the 3.5% increase recorded in June. The Bureau of Labor Statistics reported that month-on-month inflation rose by just 0.1%, mainly due to rising housing costs. Despite the slight decrease in July's inflation rate compared to June's figures, it indicates that prices are increasing at a slower pace rather than declining altogether.
Market fluctuations
Energy prices volatile due to ongoing Middle East conflict
The ongoing conflict in the Middle East has kept energy prices volatile.
Gasoline prices fell 2.9% in July from June but were up 24.6% year-on-year.
However, food prices rose only marginally in July and at a slower pace than June, while energy costs declined slightly, providing some relief to consumers.
Economic strategy
Fed chair says must be patient as price growth cools
Kevin Warsh, the new Federal Reserve chair, has said that the central bank's focus is to "keep inflation moving down" without shocking the economy.
He emphasized that the Fed cannot wave a "magic wand" to reverse years of above-target inflation and must be patient as price growth gradually cools.
Excluding food and energy prices, core inflation rose 0.2% after remaining unchanged in June, with medical care costs and airline fares edging higher while car insurance continued its decline.
Investor response
Financial markets react calmly to latest inflation figures
Financial markets reacted calmly to the latest inflation figures, with stocks remaining largely unchanged as they were mostly in line with market expectations.
Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management, said the figures were "no big surprise" and that inflation is not "reaccelerating."
Recent labor market concerns have also softened expectations for a rate increase after July's report showed a loss of jobs.
Expert opinions
'Inflation on a real decelerating course'
Jeffrey Roach, Chief Economist at LPL Financial, said inflation is on a "real decelerating course," noting that July's drop in energy prices "helped soften the inflation pressures of the month."
Bill Adams, Chief US Economist at Fifth Third Commercial Bank, said this report "keeps a narrow path open for the Fed to hold rates steady in September."