CPI 8.5% - Inflation Cools?
July CPI was released yesterday.
It rose 8.5% year-on-year in July, better than the market expectation of 8.7% and down from 9.1% last month.
Core CPI was 5.9%, beated the expectations of 6.1%.
How do CPI segments move?
The fall in inflation was mainly affected by declining energy prices, especially oil prices.
According to the data,
the retail price of gasoline has continued to fall since July, driving the CPI's gasoline price down 7.7% YoY, the largest decline since April 2020.
The food price index rose 1.1% in July from a year earlier, and housing costs remained high. Declines in used car prices offset increases in food and rent prices.
Different Responses To The Same 8.5%: March vs July
Although July's CPI data only returned to March's level, the market reaction was very different from March's.
The March CPI - 8.5% yoy- was higher than expectation and recorded the highest growth rate in nearly four decades.
The three major stock indexes fell for two days, hitting a three-week low.
And yesterday after the release of July CPI data, the three major indices jumped 2%, hitting a new three-month high since May 4.
Among them, the $NASDAQ(.IXIC)$ rose from a low of 10,565 to 12,854, up 20%, entering a technical bull market.
Mixed Rate Hike Expectations
Stephen Hoedt, managing director at equity and fixed income research at Key Private Bank, said in an interview:
"A number of components that people have been flagging as being potentially problematic and keeping inflation persistent at high levels, started to show some easing."
"I really do think that that opens the possibility to the Fed considering 50 basis point hikes instead of 75.
However, Neel Kashkari, President of Federal Reserve Bank of Minneapolis said on Wednesday that:
The Fed is "far, far away from declaring victory" on inflation
the U.S. central bank will need to raise its policy rate another 1.5 percentage points this year and more in 2023, even if that causes a recession.
At present, July CPI of 8.5% is still at a high level.
Although most analysts believe that they have not yet seen substantial evidence of lower inflation, but the market has begun the rally.
Is the market too optimistic about inflation/rate hike?
Do you think US stocks will start a new stage - entering a bull market?
3 Indices surge - will you chase the high or just watch?
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Good sharing
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