Headline US CPI Inflation Eased in July, but is it Enough to Slow the Fed’s Tightening?
The headline Consumer Price Index moderated to +8.5% y/y in July, from 9.1% in the prior month, while the core index proved more sticky, staying at +5.9% y/y
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The headline Consumer Price Index moderated to +8.5% y/y in July, from 9.1% in the prior month, while the core index proved more sticky, staying at +5.9% y/y
The NFP release was a big upside surprise. Unemployment dropped to 3.5%, and the economy created 528K jobs during July (vs 250K estimate). Expectations are now for another 75bps hike in September, with all eyes on today's CPI release. Last week saw both the RBA and BoE raise rates by 50bps, with the BoE's starling communication of 13% inflation by year-end and the onset of a recession. Friday sees UK…
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Major central banks have implemented aggressive rate-hike cycles in order to combat surging inflation, but fears of recession make their job difficult and their forward guidance unclear
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The BoE delivered its biggest hike in twenty-seven years today, but moderated its guidance, while projecting recession and higher inflation ahead
Fed officials start preparing market for further rate hikes.
The RBA delivered its fourth straight rate hike, but changed its rhetoric in a way that could be a precursor of more moderate moves ahead, sending AUD/USD lower
The 10-yr real rate is just 7bps from 0 (black line chart), and the 5-yr is 7bps below 0 (red line chart). Given that interest rates are included in the denominator of the time value of money, this deterioration is supportive of present values. I.e. it is acting against the whims and desires of the Fed's stated intention of controlling inflation.
The Fed hiked rates by 75bps and cancelled forward guidance. GDP indicates a technical recession, and US inflation is still ticking at the highest level in 40 years. The Eurozone shows resilience but with savage inflation on its side of the pond. This week the BoE and RBA will hike rates, but there is scope for surprises. NFP Friday has a forecast of 250K jobs created in July. Yet, the…
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