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Tariffs

Stagflationary Dilemma Looms as July CPI Data Print Approaches

Strategic Insights

— 1 min read

Markets will closely monitor the upcoming US Consumer Price Index (CPI) release on August 12, which could indicate whether rising tariffs have led to higher inflation. Policymakers will face a crucial decision on whether to prioritize combatting inflation or promoting employment. This week's CPI data could be a game-changer, forcing the Federal Reserve to choose between fighting inflation and supporting employment.

Key Takeaways:

  • Markets expect a 0.2% monthly increase in US July inflation and a 2.8% year-over-year rise, with core inflation, excluding energy, expected to rise by 0.3% monthly and 3.0% YoY.
  • US inflation has been trending upward, with the all-items index rising 2.7% over the 12 months ending June, after rising 2.4% over the 12 months ending May.
  • The impact of tariffs on prices in America remains unclear, with markets looking to the July inflation data for answers.
  • Goldman Sachs predicts Trump's tariffs could increase annual inflation to 3.8% by December, the highest level since 2023.
  • Walmart CEO warns of potential price hikes due to tariffs and uncertainty about the impact on core business.
  • The Federal Reserve has maintained its interest rates since December, with Fed Chair Powell preferring to wait until the impact of pricing tariffs is determined before considering rate cuts.

Statistics:

  • 0.2%: Expected monthly increase in US July inflation.
  • 2.8%: Expected year-over-year rise in US July inflation.
  • 0.3%: Expected monthly rise in core inflation, excluding energy.
  • 3.0%: Expected year-over-year rise in core inflation, excluding energy.
  • 2.7%: US CPI data over the 12 months ending June.
  • 2.4%: US CPI data over the 12 months ending May.
  • 2.9%: US all-items less food and energy index over the last 12 months.
  • 2023: Year when inflation is predicted to rise to 3.8% by December, according to Goldman Sachs.

Sources:

  • David Russell, Global Head of Market Strategy at TradeStation, cited in the article.
  • Radhika Rao, Executive Director and Senior Economist at DBS Bank, cited in the article.
  • Michael Brown Senior Research Strategist at Pepperstone, cited in the article.
  • Ahmad Assiri Research Strategist at Pepperstone, cited in the article.
  • Walmart CEO, quoted in the article.

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