Key facts
- US inflation cooled to 3.4% in July.
- US inflation was 3.5% in June.
- Core inflation in the US rose 0.2% monthly.
- Traders reduced bets on a September Federal Reserve rate hike.
- Market expectations for a Bank of Japan rate hike have intensified.
- The UK economy grew by 0.3% in June.
- Russia's annual inflation eased to 5.98% in July.
- India's annual retail inflation increased to 4.45% in July.
- Venezuela's monthly inflation rate surged to 19.9% in July.
- US-Japan conducted joint intervention to support the yen.
US inflation cooled to 3.4% in July, meeting expectations and prompting a reduction in bets on a September Federal Reserve interest rate hike. This figure represents a decrease from the 3.5% rate observed in June, with contributing factors including moderating food costs and falling energy prices. Core inflation, which excludes volatile food and energy components, rose by 0.2% monthly and 4.45% annually. This data provides the Federal Reserve with potential room to hold interest rates steady at its upcoming meeting. Forecasters anticipate a monthly core inflation reading of 0.2%, but a 0.3% reading might still prompt a hike.
In contrast to the cooling US inflation, market expectations for a Bank of Japan rate hike have intensified. This shift follows joint U.S.-Japan intervention efforts aimed at supporting the yen, leading traders to price in further rate increases from the BOJ this year. Policymakers face pressure to meet these heightened expectations or risk a renewed slide in the yen's value.
Globally, inflation trends present a mixed picture. The UK economy demonstrated resilience, growing by 0.3% in June, exceeding forecasts. Reserve Bank of Australia Assistant Governor Christopher Kent indicated that the central bank's rate hikes are working as intended, impacting consumer spending. China's central bank pledged policy support but avoided explicit rate cuts. Russia's annual inflation slowed to 5.98% in July, though it remains above the central bank's target. India's retail inflation rose to 4.45% in July, driven by food prices, and Venezuela experienced a significant surge in monthly inflation to 19.9% in July.
Geopolitical tensions and a stalled peace agreement are cited as factors contributing to elevated prices, despite the overall cooling trend in US inflation. A weaker jobs report, showing a loss of 23,000 jobs, also influenced the Federal Reserve's considerations. Oil prices fell amid revised global demand outlooks.