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Consumer Price Index (CPI) data released by the U.S. Department of Labor in July showed that CPI rose by 8.5% year-on-year in July, higher than the previous market expectation of 8.7%. Among them, the CPI in July increased by 0.5% month-on-month, which also exceeded the expected 0.2%. This means that U.S. inflation may have peaked and price gains have slowed.

Specifically, the growth of food, gasoline and housing rents in the United States slowed down in July, indicating that the positive effects of factors such as supply chain improvements and increased crude oil supply are emerging. The core CPI excluding food and energy rose only 0.3% month-on-month, a sharp decline from 0.7% in June. Clothing and used car prices also fell.

This shows that inflationary pressure is weakening and the Federal Reserve's interest rate hike policy has achieved results. If U.S. inflation data continues to fall in the next few months, the Federal Reserve may slow down the pace of interest rate hikes during the year, which will reduce the pressure on the dollar to appreciate and also benefit emerging market assets.

Of course, inflation remains high and the Fed's policy remains hawkish. But this round of interest rate hikes is coming to an end, and as long as the economy is running smoothly, interest rates are expected to be cut next year. It is good news that inflation has peaked. The market outlook needs to monitor data such as employment and wages to assess the risk of economic decline.