Global Market – Inflation softening & U.S. Fed preparing for another rate hike
This week we will discuss softening of inflation to below 4%, lowest level since April 2021. US Fed is behind the curve in this cycle. US CPI & Core CPI data do indicate softening, so now the focus will shift to US Fed meeting on 26-Jul-23.
US CPI & PPI data – indicate softening
After strong jobs data in first week of July and US FOMC meeting minutes, market is now factoring in 25-bps rate hike on 26-Jul-23. But CPI & Core CPI data released this week could trigger one more pause before US Fed could review its decision.
Equichain Wealth Advisors: Market View & Opinion
US Fed has long term inflation target of 2% and latest data released is still above U.S. Fed’s long term inflation target. Current US interest rate is at 5.00% – 5.25%. In year 2006 – 07, interest rate in US was at 5.25% and sustain at that level for 14-months before we have seen sub-prime crisis.
We believe, economic slowdown and inflation cooling has direct co-relation. Corporate earnings may get impacted with leg effect as interest rate hike takes some time to show its impact on bottom of pyramid.