The Bureau of Labor Statistics (BLS) released the July Consumer Price Index (CPI) report last night (12th). Following the data release, the market has increased its bets on a 25 basis point rate cut in September. President Trump has also reiterated that Fed Chairman Powell should cut rates.
The U.S. Bureau of Labor Statistics (BLS) released the July Consumer Price Index (CPI) report last night (12th), revealing the latest dynamics of inflation trends in the U.S. The report shows that the year-on-year growth rate of the overall CPI in July is 2.7%, unchanged from June, but lower than the market expectation of 2.8%; the month-on-month growth rate is 0.2%, slightly lower than June's 0.3%.
The core CPI (excluding food and energy) year-on-year growth rate rose to 3.1%, up from 2.9% in June, reaching a new high in nearly six months, with a month-on-month growth rate of 0.3%, higher than June's 0.2%.
Expectations for a September rate cut rise
Although U.S. Federal Reserve Chairman Jerome Powell previously emphasized that he would not consider cutting rates until the impact of tariffs on prices was determined, after the July CPI data was released, market expectations for a rate cut in September significantly increased.
Firstly, Nick Timiraos, a reporter for the Wall Street Journal known as the 'Fed's mouthpiece,' stated on platform X that while the July CPI data is not a 'no-inflation' outcome, the inflation level may not be sufficient to hinder a rate cut in September. Additionally, Tiffany Wilding, an economist at Pacific Investment Management Company (PIMCO), further pointed out that tariff-related pressures are primarily concentrated in the goods sector, with a slower transmission process, while inflation pressures in other areas appear to be very controllable. Wilding believes this is a positive signal for the Fed, indicating that the inflation environment is favorable for adjusting monetary policy.
At the same time, market confidence in rate cuts is also reflected in prediction markets. On the two major prediction platforms, Polymarket and Kalshi, the odds of a Fed rate cut in September have exceeded 80%. However, the market generally believes that the cut will likely be 25 basis points, rather than a more aggressive 50 basis points.
Finally, according to the CME Watch tool, the market currently believes that the likelihood of the Fed cutting rates by 25 basis points in September is as high as 94%.
Trump: Tariffs did not exacerbate inflation; we need to sue Powell
After the release of the July CPI report, President Trump also posted on Truth Social, stating that Powell must cut rates now and mentioned he is considering allowing a lawsuit against Powell for allegedly wasting billions of dollars on the renovation of the Fed building.
Powell is truly Mr. Too Late; he must lower interest rates now. He is always 'too late,' causing immeasurable damage. Fortunately, the economy is performing very well, and we have broken through the constraints imposed by Powell and that complacent Fed committee. However, I am considering allowing a significant lawsuit against Powell for his poor and extremely incompetent management of the construction of the Fed building. This project cost $3 billion, which should have been a $50 million renovation. It's outrageous!
Subsequently, Trump continued to emphasize that tariffs have brought huge revenue to the U.S. rather than causing greater inflationary pressure.
Tariffs have brought trillions of dollars in revenue to the U.S., providing incredible benefits to our country, stock market, overall wealth, and nearly every aspect. It has been proven that, even at this stage, tariffs have not caused inflation or any other issues for the U.S., but rather allowed a massive influx of cash into our treasury. Moreover, data shows that in most cases, consumers don’t even have to pay these tariffs as they are primarily borne by businesses and governments, many of which are foreign entities. However, David Solomon and Goldman Sachs refuse to acknowledge this. Their predictions regarding the market impact and the tariffs themselves were wrong long ago, just like their predictions on many other matters were equally incorrect. I think David should find a new economist, or perhaps he should focus on being a DJ instead of worrying about running a major financial institution.
U.S. stocks rise
After the CPI report was released, U.S. stocks collectively rose, with the four major indices performing as follows:
Dow Jones Industrial Average: up 1.09%, or 480 points, at 44,448.84 points
S&P 500 Index: up 0.68%, or 41 points, at 6,415.14 points
NASDAQ Index: up 0.61%, or 123.75 points, at 21,502.94 points
Philadelphia Semiconductor Index: up 1.73%, or 98.35 points, at 5,770.89 points
Ethereum breaks above $4,600
In the cryptocurrency market, Ethereum surged after the CPI announcement, breaking above $4,600, reaching its highest level since January 2022, and is now less than $300 away from its all-time high at the end of 2021.
Bitcoin, on the other hand, remains relatively weak, trading in a narrow range around $120,000, having slightly dipped below the $119,300 level this morning.
