U.S. inflation slowed notably last month, data from the Bureau of Labor Statistics indicated Wednesday, setting the possibility of a pause in Fed rate hikes.
U.S. inflation slowed notably last month, data from the Bureau of Labor Statistics indicated Wednesday, setting the possibility of a pause in Fed rate hikes and triggering a big pre-market jump for U.S. stocks.
The headline consumer price index for the month of July was estimated to have risen 8.5% from last year, down from the 9.1% pace recorded in June and firmly inside the Street consensus forecast of 8.7%. The June reading was the fastest since December of 1981.
On a monthly basis, inflation was flat the BLS said, compared to the June increase of 1.3% and a May reading of 1.1% and again fell below the Street forecast of a 0.2% acceleration.
Gas prices were a big component to the softer reading, as the national average cost for a gallon of gas looks set to fall below the $4 mark for the first time since early March this week, pulling prices more than 21% lower from their early June record highs amid run of fifty consecutive days of decline.
So-called core inflation, which strips-out volatile components such as food and energy prices, rose 0.3% on the month, and 5.9% on the year, the report noted, with the both the annual and monthly reading coming inside Street forecasts.
On Wall Street, the futures tied to the S&P 500 are indicating a 70 points opening bell gain while those linked to the Dow Jones Industrial Average are priced for a 425 point advance.
Benchmark 2-year Treasury note yields are trading at 3.159% while 10-year notes are pegged at 2.866% while 2-year notes fell to 3.095%. The dollar index, which tracks the greenback against a basket of its global peers, was marked 1.15% higher at 105.183
The CME Group’s FedWatch is pricing in a 36.5% chance of a 75 basis point Fed rate hike in September, down from 66.5% before the inflaiton release, which would take its target rate to between 3% and 3.25%.
The Atlanta Federal Reserve’s GDPNow forecasting tool, a real-time benchmark, suggests the U.S. economy is growing at a 1.4% clip, following contractions in both the first and second quarters of the year.