The inflation reading for July was announced today, as 3.2%. This shows a slight uptick from the June data, but the core inflation edged down to 4.7%. The stock markets fell in reaction to the reading in anticipation of a higher probability of a further rate hike.
However, the labor market has cooled adding 187,000 jobs, less than average, and hiring in finance and services was above average. This is in contrast with job market trends through 2023, as layoffs in tech and finance were common and the job market was strong.
This reading increases the probability of a rate hike this year, but it is not certain if this will be in September. The lag of monetary policy due to some sticky rates like mortgages should not be forgotten.
The decision on rates in the September meeting will definitely depend on the August data, but I still believe the Fed will take a wait-and-see approach.
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