Key facts
- The July US consumer price index report is expected to show inflation cooling to 3.4%.
- US inflation was 3.5% in June, the lowest since March.
- Rising rental vacancy rates and moderating wage gains are factors in the expected inflation slowdown.
- Boston Fed President Susan Collins is open to a September interest rate hike if inflation stays high.
- Poorer Americans are struggling with the cost of living, exacerbated by Middle East events.
- Traders have scaled back expectations for a September Fed rate hike.
- Geopolitical tensions in the Middle East and rising oil prices are influencing market sentiment.
- A recent jobs report showed a slowdown in the labor market.
- Mortgage rates may stay below 7% through 2026.
- Brazil's inflation slowed to 4.44% in July.
- Brazil's inflation was 4.64% in June.
- Lower housing costs in Brazil offset rising electricity bills.
The July Consumer Price Index (CPI) report is anticipated to reveal a cooling in U.S. inflation, with economists forecasting a rate of 3.4%. This projected figure represents a decrease from the 3.5% recorded in June, which was the lowest inflation rate observed since March. Factors contributing to this expected moderation include an increase in rental vacancy rates and a slowdown in wage gains. The U.S. dollar traded sideways as currency markets awaited this crucial inflation data, leading traders to scale back their expectations for a potential interest rate hike by the Federal Reserve in September. Geopolitical tensions in the Middle East and rising oil prices are also influencing market sentiment.
Boston Fed President Susan Collins stated that she remains open to a September interest rate increase if inflation data continues to show elevated levels. She highlighted that lower-income Americans are particularly struggling with the cost of living, a situation exacerbated by events in the Middle East. A recent jobs report indicated a slowdown in the labor market, which could influence the Federal Reserve's monetary policy decisions. Economists suggest that this cooling labor market may contribute to keeping mortgage rates below 7% through 2026, potentially offering relief to homebuyers and supporting housing demand.
In parallel developments, Brazil's inflation decelerated to an annual rate of 4.44% in July. This marks a decrease from the 4.64% inflation rate recorded in June, according to data from the national statistics agency IBGE. The reduction in inflation was partly driven by lower housing costs, which helped to offset increases in electricity bills. This deceleration brings Brazil's inflation rate within the target range set by its central bank.