Arabictrader.com – Following the release of June’s consumer price inflation data by the US Census Bureau, which surprised markets with its lower-than-expected figure, experts at JPMorgan (NYSE:) have revised their predictions for US interest rate decisions this year.
The experts at the American bank now expect a rate reduction in September, a shift from their previous forecast of December. This change in outlook was prompted by the unexpected slowdown in inflation growth, which reached its lowest point since March 2021.
Today’s data revealed an annual inflation rate of 3.0% in the US consumer price index, marking the lowest reading in a year. This figure fell short of market expectations, which had anticipated a rate of 3.1%, compared to the 3.3% recorded in May.
Regarding the core inflation rate, which excludes energy and food prices, it reached 3.3% in June, marking its lowest level since March 2021. Market forecasts had predicted a stable rate of 3.4%, as seen in May.
JPMorgan Revises US Interest Rate Expectations Amid Lower Inflation
The recent release of US consumer price inflation data for June surprised market analysts and prompted a change in US interest rate predictions by JPMorgan. The data showed a significant slowdown in inflation growth, with the core inflation rate hitting its lowest point since March 2021.
Slowdown in US Inflation
The US Census Bureau’s June inflation data revealed a notable slowdown in both headline and core inflation. Headline inflation, as measured by the annual US consumer price index, reached 3.0%, its lowest level in a year. This figure fell short of market expectations of 3.1% and marked a decrease from the 3.3% recorded in May.
Furthermore, the core inflation rate, which excludes volatile energy and food prices, came in at 3.3% for June. This represents the lowest reading since March 2021 and indicates a cooling in inflation pressures. Markets had anticipated the core inflation rate to remain at 3.4%, the same level as the previous month.
Impact on Interest Rate Expectations
Following the unexpected inflation data, JPMorgan experts revised their outlook on US interest rate decisions for the remainder of the year. The bank’s previous expectation was that the Federal Reserve would begin reducing interest rates in December. However, based on the recent inflation figures, JPMorgan now predicts a rate cut as early as September.
Factors Influencing Inflation
Several factors have contributed to the recent slowdown in US inflation. These include:
- Falling energy prices: The decline in oil and gas prices has significantly impacted overall inflation.
- Supply chain improvements: Ongoing efforts to streamline supply chains and alleviate bottlenecks have eased product shortages, reducing upward pressure on prices.
- Cooling consumer demand: Rising interest rates and a weakening economic outlook have caused a slowdown in consumer spending, which is impacting inflation.
- Increased competition: The growing presence of online retailers and the rise of e-commerce have increased price competition, limiting price increases.
Market Reactions
The news of lower inflation and JPMorgan’s revised rate cut expectations sent positive signals to the markets. Stock market indices rose on the back of optimistic investor sentiment.
However, it’s important to note that inflation remains a key concern for the US Federal Reserve and the broader economy. Continued monitoring of inflation trends and economic indicators is crucial for formulating appropriate monetary policy decisions.
While the recent slowdown in inflation is a positive development, it’s too early to declare the inflationary pressure fully subdued. Further reductions in interest rates will depend on the trajectory of inflation and the overall economic environment.