After the US CPI data, analysts think that the Fed will keep its interest rate increase options open for the rest of the year. The fact that the US CPI data did not exceed expectations by much increased the risk appetite in the markets.
Although core inflation in the USA has started to rise again, the announcement of general CPI data largely close to expectations increases risk appetite.
Stock indices across Asia Pacific are on the rise. Japan’s Topix and South Korea’s Kospi rose 1 percent, while Hong Kong’s Hang Seng recorded a moderate loss.
US stock futures are also positive.
Despite the possibility of a hawkish Fed, the dollar is falling. Bloomberg Dollar Index is at 1,248 points, down 0.2 percent.
US bond yields turned downward. The two-year yield sensitive to the policy rate decreased by one basis point to 4.96 percent, and the 10-year yield decreased by two basis points to 4.23 percent.
There is an increase in oil prices on the new trading day. Brent active contract is above $92. Spot gold, which suffered a loss after the CPI data, is positive on the new trading day.
US CPI and Fed Comments from Analysts
The rise in monthly core inflation in the USA for the first time in six months turned the eyes towards the Fed’s hawkish wing. According to analysts, interest rate increase options may be on the table for the rest of the year following Wednesday’s US CPI data.
Nationwide Life Insurance Chief Economist Kathy Bostjancic stated that the data was disappointing and said, “This data will keep the Fed in a hawkish state of alert and will keep the interest rate increase possibilities for November and December alive.”
High Frequency Economics US Chief Economist Rubeela Farooqi stated that although the data exceeded expectations, it supports skipping the interest rate increase in September. “On the other hand, the FOMC will not declare victory until it sees more evidence towards the 2 percent target,” Farooqi said. “The committee will continue to be open to further interest rate increases if necessary,” she commented.
Inflation Insight President Omair Sharif stated that he expects an increase in core inflation in the fourth quarter and that this may result in a Fed interest rate increase in December. The Fed will announce its interest rate decision on
Wednesday, September 20.