News Digest: Declining Inflation raises doubts on Fed rate hike
July 16, 2023
Consumer prices across the United States showed signs of deceleration as the latest report suggested that retail prices in June rose at their slowest annual pace since March 2021. Market analysts believe this data could queer the Fed’s path on interest rates, a report says.
Consumer Price Index reports released on July 12 showed core inflation, where the cost of food and gas is excluded, rose 4.8% over the last 12 months. This was lower than the 5% growth that economists had expected but still way beyond the Fed’s 2% goal.
With the Fed’s July meeting barely days away, analysts believe this softening may not influence the broad consensus around a 25 basis point rate hike, especially in the wake of the US labor market continuing to display some tightness. The Futures tied to the Fed’s benchmark rates are now pricing in a 27% chance of the Fed raising rates by 50 basis points by end-November.