US CPI Holds at 3.4% as Expected, Jackson Hole Next
July inflation prints in line with consensus, keeping the Fed on hold for now. Markets now turn to Warsh's speech at the Jackson Hole symposium for clues on September policy.
US July CPI came in at 3.4% year over year, matching the consensus. The core annual rate also met forecasts. That gave the Federal Reserve little new ammunition for a rate hike in September. Futures pricing dropped to around 35% odds of an increase, down from roughly a coin flip before the data, traders said.
The focus now shifts to the Jackson Hole symposium, running August 27-29. Fed Chair Warsh is expected to speak, though the agenda is not out yet. Warsh has pushed for a shift in forward guidance, so a firm policy signal from his speech is unlikely, analysts said. The symposium's theme this year is 'Financial Innovation: Implications for Payments and Policy'.
The ongoing US-Iran conflict and the Strait of Hormuz closure continue to support oil prices. That keeps upward pressure on bond yields. The 10-year Treasury yield held near 4.65% after the CPI release. A firm move above 4.70% could ripple through broader markets, traders said. Without the oil supply disruption, the case for a September hike would be weaker, several traders noted.
The next major data point comes after Jackson Hole. August CPI is due September 11, five days before the FOMC meeting and during the blackout period. Until then, markets will remain in a guessing game, with pricing stuck in the middle range, traders said.
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