Bond prices drop as inflation data suggests further rate hikes by the Federal Reserve
News Article: July 2022 Consumer Price Inflation Report Suggests No September Rate Cut by the Federal Reserve
The July 2022 consumer price inflation report, released by the Labor Department, showed a steady 2.7 percent year-over-year increase in inflation, with core inflation (excluding food and energy) climbing by 0.3 percent in July. This monthly increase matched economist estimates, but the annual rate of core consumer price growth accelerated more than expected, reaching 3.1 percent.
Despite the anticipation of a pace of growth ticking up to 2.8 percent, it remained at 2.7 percent. The yield on the benchmark ten-year note rose 2.0 basis points to 4.293 percent following the release of the report.
Bill Adams, Chief Economist for Comerica Bank, stated that July's faster core inflation was largely driven by hot increases of core services prices. The Federal Reserve, on the other hand, believes that services prices are a better metric of inflation's trend than goods prices, where they are expecting a temporary pickup in inflation from tariffs.
The Federal Open Market Committee (FOMC) in July 2022 decided to keep the federal funds rate unchanged, marking the fifth consecutive meeting without a change. The July 2022 FOMC minutes revealed a split but a majority view that inflation risks outweighed risks to employment, leading the Committee to emphasize vigilance and data monitoring rather than a cut. Although two Fed Governors dissented in favor of a 25-basis-point cut citing labor market concerns, the predominant stance was to maintain rates given persistent inflation pressures and tariff-related cost risks.
The July 2022 inflation data and Fed minutes collectively pointed to maintaining or possibly increasing rates rather than suggesting a rate cut in September 2022. The Fed emphasized carefully assessing incoming data before making future policy adjustments. A lack of major U.S. economic data may keep some traders on the sidelines on Wednesday ahead of the release of several key reports in the latter part of the week.
[1] Source: Labor Department's report on consumer price inflation in July. [2] Source: July 2022 FOMC minutes. [3] Source: CPI for July 2022 showing inflation at 2.7% year-over-year. [4] Source: CME Group's FedWatch Tool indicating the chances of a quarter point rate cut next month have risen to 94.4 percent following the report.
Read also:
- Citizen Thekla Walker, Minister, urges: "Let's face our responsibilities at home"
- Editorial Correspondence: Justifying the Elimination of a Program Earmarked for Reducing Our Own Carbon Footprint?
- Potential resistance encountered for Trump's nominee at the Federal Reserve
- Electric Vehicle BYD Song Plus withstands thunderous bolt hits, displaying no discernible damage.
