Inflation in the largest economy in the world amounted to July 2.9% year-on-year. This reading is lower than expected – the average expectation of analysts and economists was 3% (i.e. it assumed maintaining the June level).
US inflation slows down
Core inflation (i.e. without the most volatile price Inflation (food and energy) also slowed down, in line with expectations, to 3.2 from 3.3 percent in June. Month-on-month inflation amounted to 0.2 percent. “The key indicator for the monetary authorities, excluding food and energy, rose by 0.2 percent m/m. At this value, the Fed's target is met in the medium term,” comments Bartosz Sawicki, an analyst at fintech Cinkciarz.pl.
What Will the Fed Do? Interest Rates in Focus. What About the Dollar?
Declining inflation is another signal for the Federal Reserve (Fed) to cut interest rates. The bank's inflation target is 2%. While the expectation that the Fed will start cutting rates by 25 basis points in September is widespread, a significant slowdown in price growth could encourage even deeper cuts, and certainly fuel market bets on such a scenario. Last week, weaker (even recessionary) data from the US labor market than expected spoke in favor of a deeper rate cut. Today's data may not be good enough to significantly increase the chances of a deeper rate cut in the US – although they support a cut in general. Currently, US interest rates are in the range of 5.25-5.50% – the largest in over two decades.
Today's data did not move the dollar much. Right after their publication, there was movement on the EUR/USDbut it wasn't big – the dollar weakened slightly. But since the beginning of this month it has already lost 2 percent in relation to the euro.
Today we also got to know the full data on inflation in Poland – you can read about them in this text: Inflation surges: full data on price increases in July. We also found out that Poland The economy grew much faster than expected in the second quarter: We are accelerating and how! There is new data on Poland's GDP. A surprise “at the top of the historical error band”.