CPI data contradictions intensify the Federal Reserve's dilemma, and policy suspense in September suppresses the trend of the US index

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On Tuesday, data showed that U.S. inflation only rose moderately in July, retaining the possibility of the Federal Reserve cutting interest rates next month. The US dollar index fell sharply and returned to near the 98 mark. As of now, the US dollar price is 98.05

The US July unseasonally adjusted CPI annual rate was the same as last month, recording 2.7%; the July unseasonally adjusted core CPI annual rate rose to a five-month high, recording 3.1%. After the data was released, traders increased their bets on the Federal Reserve's interest rate cut in September.

Trump: Federal Reserve Chairman Powell must now cut interest rates and consider allowing major lawsuits against Powell; tariffs have not caused inflation or brought other problems to the country, and consumers have not even paid these tariffs.

U.S. Treasury Secretary Becent: The Federal Reserve should consider cutting interest rates by 50 basis points in September.

Anthony, the Trump-nominated Director of Labor Statistics, proposed to suspend the issuance of monthly employment reports.

Federal nominee Milan: It's great to see inflation perform well. Whether the nomination can be passed by September meeting depends on the Senate.

Richmond Fed Chairman Barkin: You may see pressure on inflation and unemployment, and the balance between the two is unclear; Kansas Fed Chairman Schmid: Tariffs have limited impact on inflation, which is a reason to keep the policy unchanged, not an opportunity to cut interest rates.

Former Fed official Brad: Last weekHe talked with US Treasury Secretary Besent and was happy to act as Besent wishes. If nominated, the position of Federal Reserve Chairman will be accepted.

The latest data from the US Treasury Department shows that the total U.S. debt amount exceeded $37 trillion for the first time.

Trump will attend online talks on Wednesday on Ukraine; Zelensky said he will meet with Putin and Trump, but the time is unclear.

White House: The Russian-US summit will be a bilateral form and there will be no third party. Trump may have plans to visit Russia in the future.

Summary of institutional views

Dutch International Bank: The UK job market has cooled down but there are positive signals, and the prospect of the Bank of England's interest rate cut in November remains variable.

The UK job market is undoubtedly cooling down, but the slowdown in the decline in employment may indicate that the worst period may have passed after a significant tax and a minimum living wage increase.

There are many notable points in the Bank of England’s resolution in August, one of which is that policymakers appear to be particularly “indifferent” to the job market, despite a considerable cooling of recruitment conditions in recent months. However, the latest employment data seem to confirm the Bank of England’s view. Between June and July, employment fell by only a slight 8,000. Although this is the eighth monthly decline in the past nine months, it is the smallest decline among them. Given that these data tend to be up-regulated, employment in July may actually increase slightly once the final data is obtained.

This coincides with the results of some business surveys that have shown that after a difficult spring, edoyoko.companies’ willingness to recruit has begun to improve. The increase in national insurance (wage tax) and the significant increase in minimum living wages in April have posed a major resistance to the economy, especially the consumer service industry.

In view of the good news about wage growth, we believe the Bank of England is still capable of cutting interest rates in November, but given the unexpected hawkish stance at last week's meeting, if we see a edoyoko.combination of jobs data improvement and inflation data stronger than expected in the future, the Bank of England is likely to be more inclined to stay on the wait-and-see until after the New Year.

Wells Fargo: The core CPI hit a six-month high, and the prospect of interest rate cuts remains variable.

The rise in the consumer price index (CPI) in July roughly meets expectations. The overall CPI monthly rate rose moderately by 0.20%, making the year-on-year growth rate stable at 2.7%. Excluding food and energy, the core CPI was stronger, with a monthly rate of 0.32%, pushing the year-on-year growth rate to 3.1%, the highest annualized reading since February. Since health care and air ticket prices are not sources of personal consumption expenditure (PCE) deflators, the Fed's preferred inflation measure, we expect the core PCE index to rise relatively modestly in July, with a preliminary estimate of 0.22%.

Today's CPI report highlights the challenges the Fed faces in balancing the dual mission of "price stability" and "maximizing employment." The labor market hasShows signs of loss of kinetic energy, but inflation: 1) is still above the 2% target, and 2) is drifting in the wrong direction.

Because inflation may still be higher than the target in the edoyoko.coming year, we are skeptical that the Fed rate cut will exceed our current forecast (25 basis points each in the next three meetings). We believe that unless the labor market worsens more significantly, it is difficult to reason to support a loose monetary policy at present.

Analyst Matthew Ryan: The Fed's interest rate cut in September is a "confirmation", but strong core inflation may hinder subsequent easing

Today's US CPI report provides Fed officials with more reference on monetary policy paths. While an unexpected decline in overall inflation rates could make headlines, core price pressure is accelerating again, reaching its fastest growth rate since February.

This may indicate that U.S. edoyoko.companies are beginning to pass on tariff costs to consumers through price increases, although it seems that edoyoko.companies are still bearing most of the costs. However, it is too early to draw conclusions, and the full impact of tariffs on U.S. inflation remains to be seen. The subconscious reaction of market participants to the weak overall inflation data is to sell the dollar.

However, today’s data has not changed much about our view of Fed rates. We still believe that the rate cut in September is basically a foregone conclusion, and further easing policies may follow up in December. A rate cut in October is possible, but as long as the core inflation rate continues to be above 3%, this may be difficult to achieve.

Nomura Securities: The Federal Reserve will launch a rate cut in September, which is expected to drop by 75 basis points in three times

Nomura economists currently predict that the Federal Reserve will start cutting interest rates in September due to weak labor markets and reduced inflation risks. The Fed could cut interest rates by 25 basis points at its September meeting, followed by another cut in December and March of the following year, economists at Nomura wrote in a report. While analysts' median expectation is a 25 basis point cut in the next three months, economists are divided on the timing of the rate cut. Nomura was previously one of those agencies that expected Fed officials to relax policies until later this year.

The above content is all about "[XM official website]: CPI data contradictions exacerbate the Federal Reserve's dilemma, and September policy suspense suppresses the trend of the US index". It is carefully edoyoko.compiled and edited by the XM Foreign Exchange editor. I hope it will be helpful to your transactions! Thanks for the support!

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