Lower US inflation limits rate hikes

Reports indicate that the continuous decline in U.S. inflation may reduce the likelihood of the Federal Reserve raising interest rates at its upcoming September meeting. Recent data showed that the Consumer Price Index decreased to 3.4% year-over-year in July, compared to 3.5% in June, with core inflation slowing to 2.5%. Despite this decline, inflation according to the Personal Consumption Expenditures (PCE) index—the Fed's preferred measure—is still expected to surpass 3%, which is above the 2% target. Although Fed members have expressed differing views, the market is signaling the possibility of maintaining the interest rate at 3.75%, with a 38% probability of a further hike in September, and ongoing expectations of rate increases through the end of 2026 to curb inflation.

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