Askume, Sept 11 – U.S. consumer prices rose slightly in August , but underlying inflation showed some stability, which could prevent the Federal Reserve from cutting interest rates by a half basis point next week.
The US Labor Department said on Wednesday that the Consumer Price Index rose 0.2% last month after rising 0.2% in July. In the 12 months through August, the CPI rose 2.5%. It was the smallest annual increase since February 2021, after rising 2.9% in July.
Economists polled by Askume had expected the CPI to rise 0.2%, up from 2.6% from the same period last year. Although inflation remains above the Fed’s 2% target, it has fallen sharply.
Market Reaction:
Stocks: U.S. stock futures edged lower by 0.35%, indicating a soft opening on Wall Street. Bonds: The U.S. 10-year Treasury bond yield rose to 3.676%, and the two-year Treasury bond yield rose to 3.677%. Forex: The U.S. dollar index rose 0.11% and the euro fell 0.09%.
notes:
Peter Cardillo, Chief Market Economist, Spartan Capital Securities, New York
“The report essentially confirms that core inflation is still rising. This may require the Fed to cut interest rates by a quarter of a percentage point.”
“Overall inflation is really low, especially year-over-year, and it’s moving in the right direction and getting closer to the Fed’s 2% target.”
“I don’t know if it’s shocking, but this report shows that core inflation is still a question mark. This could lead to a 25 basis point rate cut from the Fed.”
Wasif Latif, President and Chief Investment Officer, Sarmaya Partners, Princeton, NJ
“This is a clear green signal for the Fed to proceed. The market reaction may reflect this. The Fed is looking for this clear signal. So, to me, this is a clear signal to proceed with rate cuts.” This is a very strong signal that they need to cut rates by 25 basis points, and perhaps this will increase the likelihood of a 50 basis point cut.
