Fed Holds Rates Steady in July as June CPI Falls to 3.5%, but Hiking Threshold Lowers

According to China International Capital Corporation research cited by Jin10 on July 15, the U.S. June Consumer Price Index declined 0.4% month-over-month and rose 3.5% year-over-year, both below market expectations. Core CPI showed zero growth month-over-month with a 2.6% year-over-year increase, also missing forecasts.

The Federal Reserve is expected to maintain rates at its July meeting, but Fed Governor Christopher Waller's recent remarks suggest the central bank is reassessing the possibility of pre-emptive rate hikes. While China International Capital maintains its base case of no rate increases through year-end, it warns that the hiking threshold has declined, and one or two hot inflation data points could prompt further Fed discussion of rate hike options.