14.08.2025 04:07
July's Consumer Price Index (CPI) figures, released by the Bureau of Labor Statistics, revealed a year-on-year inflation rate of 2.7%, a figure lower than the anticipated 2.8%. This unexpectedly soft inflation reading has sparked a wave of market optimism, significantly bolstering expectations of an imminent Federal Reserve interest rate cut, potentially as early as September. The market responded swiftly to the news; bond yields declined, the US dollar weakened, and equity markets experienced gains.
The monthly CPI increase in July mirrored forecasts, registering a 0.2% rise compared to June. However, the annual 2.7% figure contrasted with some analyses, prompting alternative perspectives. A source, Truflation, citing data discrepancies and limitations in reflecting current consumption patterns, posited a significantly lower "true" inflation rate of 1.83%, further emphasizing the call for immediate Federal Reserve intervention. This dissenting view was disseminated via social media, tagging various influential figures in the economic sphere.
Former President Donald Trump seized upon the lower-than-expected CPI data, using it to refute claims that his administration's tariffs had fueled inflation. He publicly criticized analysts, including economists at Goldman Sachs, for their previous inflation predictions tied to trade policies. Adding to the debate, Joseph Lavorgna, counselor to Treasury Secretary Scott Bessent, attributed price reductions by exporters as a direct countermeasure to the impact of tariffs.
The market's response to the CPI release was immediate and decisive. Trading activity reflected a surge in confidence regarding a September rate cut by the Federal Reserve. Data from the London Stock Exchange Group (LSEG) indicated a dramatic increase in the probability of a 25 basis point cut, jumping to 98% from approximately 89% earlier that day. This shift in sentiment is particularly evident in the two-year Treasury yield's response – a fall of roughly two basis points to 3.729%, reflecting heightened sensitivity to anticipated Federal Reserve policy adjustments. Market analysts, such as Andrew Szczurowski of Morgan Stanley Investment Management, subsequently commented on the implications of the data and the heightened likelihood of a September rate reduction. Information regarding specific analysts' comments on the implications of this data were sourced from internet resources.
