U.S. PPIs Fall. Has Inflation Peaked?
FxPro Financial Services Ltd | Aug 11, 2022 09:56AM ET
US producer prices fell by 0.5% in July, the first decline after 26 months of growth. The year-over-year PPI rate returned to the single-digit territory at 9.8% against a peak of 11.7% in March and 11.3% a month ago.
Producer price trends are a couple of steps ahead of consumer inflation, so the first fall of the index in more than two years further strengthens the market sentiment that the Fed will tighten policy further in smaller steps.
This is both good news for financial markets and bad for the US dollar. For the stock market, falling prices mean lower costs, which have recently held back the economy. Furthermore, weak inflation benefits growth companies as it will allow the Fed to raise rates less and turn more quickly to easing.
The latter thesis is still somewhat controversial, as FOMC officials deny any intention of stopping soon and reversing quickly from a rate hike to a rate cut. Markets have their own opinion, with little confidence in the Fed after its mistake with "transitory" inflation.
As a result, we see a further decline in expectation of the Fed's next moves and a renewed momentum of pressure on the dollar. Next in the spotlight for traders and investors are import prices and the first estimates of consumer sentiment released on Friday, which could contain or reinforce buyers' optimism.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.