Overall inflation has rebounded somewhat, but core inflation is declining
The US released the latest inflation data for July. The trend of July CPI and core CPI reversed – the CPI increased by 3.2% year-over-year and 0.2% month-over-month. This inflation level rebound was weaker than market expectations; core CPI rose 4.7% year-over-year and 0.2% month-over-month, with core inflation continuing its decline as expected by the marketThis is overall a relatively positive signal。
Moreover, the month-over-month growth rate of overall inflation and core inflation compared to June did not increase, indicating that the strength of the current US inflation rebound may not be very strong, and the Fed’s disinflation process is proceeding smoothlyHowever, looking ahead, the earlier high base effect will gradually weaken, and the overall inflation level may continue to rebound in the short term. The Fed still has a way to go before achieving its inflation target。
The Fed's motivation to raise interest rates may weaken, but its stance could remain tough
Considering the state of the job market, improvements in the labor market and a continued cooling of core inflation levels are both relatively positive signals for the FedThe likelihood of unexpected rebounds in future inflation is low, so the Fed's motivation for further rate hikes will weaken. However, since the Fed must stabilize public inflation expectations to achieve disinflation, it will most likely not indicate a halt to interest rate increases, in order to avoid an unexpected rise in inflation expectations.
Although the Fed's tone may remain relatively hawkish, given the current macro situation of inflation and employment,On one hand, it means that the Federal Reserve is...