This week the US inflation data for June came out, and again came out higher than expected. Inflation was 0.3% higher than expected, with fuel and energy prices being the main culprits.
The lack of indication of a slowdown in inflation indicates that the probability of the Federal Reserve raising its benchmark interest rate by 0.75% has increased. Some investors believe that this lack of slowdown could see a 1% increase, something perfectly possible given the Fed’s strong priority to reduce inflation.
Although employment numbers remain reasonably good, the dangers of a recession increase as inflation and interest rates rise.
This has caused the stock markets to pull back again, causing a pullback in the major US indices.
On the 27th the Federal Reserve will announce its decision to raise its benchmark interest rate. As we said earlier, a 0.75% hike is expected, but a 40% probability is estimated for a 1% hike.
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