The US inflation rate continued its downward trend in July 2024, with the Consumer Price Index (CPI) falling to 2.9% year-over-year, down from 3% in June. This marks the lowest inflation rate since March 2021 and has intensified speculation about potential interest rate cuts by the Federal Reserve at its next meeting in September.The Labor Department reported that consumer prices rose just 0.2% from June to July, with nearly all of the increase attributed to higher rental prices and housing costs. The core inflation rate, which excludes volatile food and energy prices, also eased to 3.2% year-over-year.This cooling inflation has provided relief to American consumers and bolstered the case for the Federal Reserve to consider cutting interest rates. However, opinions are divided on the magnitude of potential rate cuts. While most analysts expect a 25 basis point cut in September, some argue for a more aggressive 50 basis point reduction.Financial markets have responded positively to the inflation data, with major stock indices showing gains. The S&P 500 extended its winning streak to five days, moving closer to its all-time high from July. Asian markets also rose on the news, with Japan’s Nikkei 225 jumping 1.0% to 36,808.75 and other regional indices showing gains.In related economic news, Japan’s economy grew at an annual rate of 3.1% in the April-June period, exceeding expectations and contributing to positive sentiment in Asian markets. The growth was driven by a rebound in private consumption, which rose by 1.0%, and strong export growth of 5.9%.Investors are now awaiting U.S. retail sales and weekly unemployment data due later in the day for further insights into the health of the world’s largest economy. The Federal Reserve’s decision in September will likely depend on a careful analysis of all available economic data and its potential impact on long-term inflation trends.
Key points
- US inflation rate fell to 2.
- Japan’s economy grew at an annual rate of 3.
- Asian markets rose on positive US inflation data and strong Japanese economic growth.
- Investors are speculating on potential Federal Reserve interest rate cuts in September.
9% in July, the lowest since March 2021.
1% in Q2, exceeding expectations.
Contradictions👾While most analysts expect a 25 basis point rate cut in September, some argue for a more aggressive 50 basis point reduction, indicating uncertainty about the Fed’s next move.
