According to the latest reporting data published on 10.08.2022 at 15:30 Moscow time, a slight decrease in the rate of inflation growth was noted in the United States in July 2022. Consumer prices in July increased by 8.5% compared to the same month last year. The forecast values were at the level of 8.7%, which is 0.2% below the plan.
The markets instantly reacted to this data with an increase in the S&P 500 rose by 2% (to $4 217), and the MTC by 3.7% (to $24 500) as of 08/11/2022 (12:00 Moscow time).
Reporting on inflation inspired investors a little and increased the likelihood of the Fed raising the rate by 0.5 percentage points, instead of 0.75, as many had previously predicted.
However, in order to see the long-term growth of the markets, the Fed should not just reduce the growth rate of the key rate, but generally reduce it, which is very unlikely in real life.
In fact, the deviation of the indicator by 0.2% is not so big, given that the overall inflation rate is still at 40-year highs, although it has slowed down compared to 9.1% in June. Next month, this indicator may already be higher, by the same 0.2% - all this is similar to the usual seasonal fluctuations characteristic of the markets.
Considering that the main price component of inflation, which has the greatest weight, is fuel, housing and wages, so far only the cost of the first (gasoline) has decreased. The situation is absolutely clear to the Fed and therefore it does not change its mood particularly regarding further tightening of monetary policy.
According to the source Investing.com
The US dollar exchange rate is strengthening today against major currencies. Traders evaluate statements by representatives of the leadership of the US Federal Reserve System (FRS) indicating the commitment of the US Central Bank to further increase interest rates in conditions of high inflation, Trading Economics writes.
The head of the Federal Reserve Bank (FRB) of Minneapolis, Neil Kashkari, called the statistics on the dynamics of consumer price growth in the United States in July, published on Wednesday, "the first hint" that inflation in the country could begin to slow down, but noted that this does not negate the need to raise interest rates. According to him, the Fed is still "very, very far from declaring victory."
Earlier, Chicago Fed President Charles Evans predicted that the base interest rate would rise to 3.25-3.5% per annum by the end of this year. It will reach the maximum 3.75-4% per annum only next year, Evans believes.
Therefore, today's growth of the markets can be estimated only, as they say in trading, "rebound".
Rebound or how long will the growth of the markets last? Inflation in the US is below forecast values Somehow!
