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US inflation pick up not enough for possible July rate cut

Published July 12, 2019

Author: Brett Gordon


Positive US Data Temper USD Weakness

US core consumer prices rose 0.3%, up 2.1% vs expectations of a 2% increase for the annual rate in June and was the largest gain in one and a half years.   Weekly jobless claims also topped forecasts declining 209,000 from 223,000. The Federal Reserve will now be watching the release of Q2 growth on 26th July ahead of the Fed’s next rate announcement on 31st July with a 25 basis point cut priced into markets, however odds of a more aggressive 50 basis point cut now tempered following the pick-up in inflation and a strong jobs report last Friday.

Federal Reserve Chair Jerome Powell stuck to recent calls that an interest rate cut from the US central bank is likely a done deal in day two of the semi-annual testimony at Capitol Hill due to businesses holding off on investments due to the ongoing trade war and a global growth slowdown.

ECB Minutes Indicate Easing Bias

Minutes released from the European Central Bank meeting in June indicated a need to be ready for further stimulus.  ECB President Mario Draghi mentioned soon after the meeting, “there had also been discussion on the prospects of further rate cuts and restarting net asset purchases”.  Markets are pricing in a move by the ECB in September and will be watching for more details when they meet later this month.