In the US, annual inflation dropped to 3% in June 2023, the lowest level since March 2021 and the 12th straight month of reductions. The latest US CPI for June has come in lighter than economists predicted. Now all eyes will be on US Fed’s next FOMC meeting on July 25-26. Will the US Fed resume rate hikes after pausing in June despite inflation cooling down? “The US Federal Reserve won’t be swayed and will raise interest rates this month despite inflation coming in cooler than expected, says Nigel Green of deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organizations.
The all-items index increased 3% for the 12 months ending June while the all-items less food and energy index, the core inflation rose 4.8 percent over the last 12 months. The core inflation still remains at a high level. “The central banks’ officials will argue that there is still work to be done to tame inflation and they are unlikely to be dissuaded from their course of action for the time being,” adds Green.
The deVere CEO is urging the US central bank not to raise interest rates past July. “While we believe that the Fed will raise rates in July, there is now less justification for further hikes later this year.”
Markets, meanwhile, are expectating the Fed to increase rates by 25 basis points in both July and September’s FOMC meeting. “Investors are increasingly concerned that the Federal Reserve could with further hikes overtighten and that would steer the US economy into a major recession. The central bank must also ensure the broader picture is maintained and not be too cautious by overdoing the hikes, which would trigger the US recession deeper and longer,” says Green.