- US inflation moderately rose to 2.7%, but the response of the market in President Trump’s tariffs are igniting renewed optimism for an interest rate cut in September.
Today, the US Bureau of Labor Statistics (BLS) released its Consumer Price Index (CPI) report covering the month of July. According to the agency, the value of consumer goods inflated by 2.7% on a 12-month basis. Meanwhile, core inflation, the indicator that excludes the volatile prices of food and energy, rose to 3.1% over the same period.
The figures represented a 0.2% increase in headline inflation and a 0.3% rise in core inflation for the month. Despite the slight bump in numbers, they have performed better than analysts’ expectations.
US Inflation Only Rose Less Than Expected
According to CNBC, US inflation outperformed analysts’ expectations. However, the BLS’s findings displayed the highest increase in core inflation on a monthly basis since January, while the annual rates were at their highest since February. The source claimed that the Federal Reserve usually considers core inflation metrics as more reliable when evaluating longer-term trends.
The items with the highest blow-ups in prices were fuel oil (1.8%), transportation services (0.8%), and medical care services (0.8%). Gasoline (all types at -2.2%) and utility gas service (-0.9%) had the most cost decline.
Interestingly, tariff-sensitive goods like canned fruits and vegetables have remained flat. Additionally, apparel costs only jumped by 0.1% while household furnishings jumped 0.7%.
“The tariffs are in the numbers, but they’re certainly not jumping out hair on fire at this point,” said Jared Bernstein, former President Joe Biden’s economist, in a statement to CNBC.
The new CPI report came hot on the heels of former BLS Commissioner and Biden-appointee Erika McEntarfer’s controversial firing by President Donald Trump for allegedly manipulating the latest employment data to fit her political narrative.
Interest Rate Cut Anticipated for September
The July inflation report again fueled anticipation for an interest rate cut at the September Federal Open Market Committee (FOMC) meeting. However, some doubted this assumption as the numbers are still nowhere near the 2% target of Fed Chair Jerome Powell for price stability.
The Fed notably held on to the prevailing 4.25%-4.50% interest rates in the June FOMC meeting due to its cautious stance on the rising inflation rate. Powell particularly blew an air of uncertainty about the long-term effect of Trump’s aggressive tariffs.
However, the almost muted absorption of tariff-sensitive goods on Trump’s trade policies has somehow ebbed worries from investors, prompting a renewed sense of optimism in financial markets.
What Could This Mean for Crypto?
Rate cuts usually boost investor appetite for risk assets, including tech stocks and cryptocurrencies. This is due to the perceived weakness of the US dollar and other traditional fixed-income investments like government bonds and other safe but low-interest-bearing assets.
However, as mentioned earlier, regulatory changes, innovations, hype, and other economic factors could easily disrupt this established historical trend. Hence, readers should always exercise due diligence in their investments, especially if they decide to place their trades based on speculation.
With this in mind, be reminded that nothing in this article should be construed as financial advice or promotion to buy or sell any product or asset.
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