US Inflation Slows to 3.4%, Easing Expectations for an Early Fed Hike
# inflation# interest rates# Fed
Key Points
- July US CPI up 3.4% year-over-year
- Two consecutive months of decelerating growth rates
- Market expectations for early Fed rate hikes easing
Analysis
US consumer prices rose 3.4 percent in July from a year earlier, with the pace slowing for a second straight month and market expectations for an early Fed hike easing. Note the distinction: a smaller increase means prices are rising more slowly, not falling, which is why the shelf still feels expensive. The most direct channel to Asia runs through the US-Japan rate gap, the main force behind the weak yen. If the market stops pricing early hikes, pressure for that gap to widen eases. Watch three things: whether the slowdown holds, whether the Fed's tone follows, and whether fund flows between the dollar and other currencies actually turn.