Markets Nervous Ahead of US Inflation Report
13 July 2022
Investors remain anxious ahead of today's key economic data from the US, while central banks' decisions are also keeping volatility in the markets alive.
Earlier today, In line with expectations, the Reserve Bank of New Zealand (RBNZ) increased its policy rate by 50 basis points (bps) to 2.5%. The bank stated in the policy statement that import prices were being impacted by the NZD's depreciation.
US inflation touching 10%?
The headline number for today is the annual CPI inflation rate, which includes food and energy, which is predicted to increase from May's 8.6% level to 8.8%, marking a 40-year high. The whisper rate, however, is greater than 10%.
Even though doing so runs the risk of sending the US economy into recession, such a high figure is likely to convince the US central bank of the necessity of continuing with aggressive interest rate increases, on top of the hike of 75 basis points at its most recent meeting.
To cool a hot economy, the Bank of Canada is seen increasing interest rates by 75 basis points later today. However, a slower rate of raises may be suggested in the upcoming meetings by authorities due to June's sluggish employment growth. A lack of hawkish guidance might lead to the Canadian dollar's decline following the decision.
A White House document that emphasized that US macroeconomic indicators, especially the June jobs report, are not consistent with a recession helped to improve the market's sentiment yesterday. According to the study, the US is in a better position than many other nations to make the transition to reduced inflation and sustained growth because of its robust labor market.