It's a tick in the wrong direction. The headline inflation report showed some minor improvements for a few months, but inflation still remains stubbornly high. Headline CPI rose to 3.2%, and core ticked down slightly to 4.7%, but core inflation is still far above the Fed's 2% target. Categories like food, energy, shelter, and services are still seeing substantial price increases. The report slightly lowered the odds of a September rate hike, but the Fed stresses it has a long way to go to get inflation down and likely needs to keep rates elevated into 2024, only gradually lowering them over time until inflation is back to target, which history shows takes around 2 years from peak inflation.
Wall Street ended flat Thursday as early optimism from cooler inflation faded eventually after digesting the data. Though inflation eased in July, core prices stayed high, so the Fed may maintain a tight policy for another round. Disney is the biggest winner after it announced a steep price hike on its streaming services, while GM slides on active union negotiations that could lower profits.
Gold prices hovered near one-month lows on Friday as the dollar and bond yields remained inflated despite slightly lower US core inflation data, with bullion still set to wrap up its third weekly loss. Fed officials indicated more progress is still needed on inflation before pivoting, limiting gold's gains from the data. With prices continuing to establish lower lows, the outlook for gold remains bearish.
Oil prices were flat Friday but headed for a seventh weekly gain as OPEC forecast strong 2024 demand. This positive outlook came despite the cartel's substantial output cuts in July by Saudi Arabia and Russia. However, a stronger dollar and slowing Chinese growth capped oil's recent rally.
The US dollar reversed earlier losses after US inflation data supported the possibility of another rate hike this year. Against the yen, the dollar hit 5-week highs as the Bank of Japan maintains loose monetary policy, while the euro gave up gains versus the dollar but remains near parity. Though inflation may be slowing, comments from Fed officials indicate rate cuts are not imminent as price pressures remain elevated, keeping the dollar supported for now.