U.S. stock futures rose on Wednesday as Wall Street digested a key signal on consumer prices that is set to help shape the future of near-term interest rate policy. Futures tied to the S&P 500 (ES=F) and Nasdaq (NQ=F) were up about 0.2%. Dow Jones Industrial Average (YM=F) futures were hovering near flat.
The Consumer Price Index (CPI) showed that price increases remained largely steady in July. Consumer prices rose 2.9% year-over-year in July, the first time headline inflation has fallen below 3% since 2021. On a “core” basis, stripping out food and energy costs, prices rose 3.2% year-over-year. Both figures were largely in line with Wall Street expectations.
Wall Street rose on Tuesday on positive inflation data that could signal a similar trend in consumer prices. The producer price index, which measures wholesale inflation in the U.S. economy, rose just 2.2% year-over-year in July, roughly in line with the Federal Reserve’s 2% target.
The combined inflation signals could push the Fed closer to cutting rates. Even the Fed’s most hawkish members are signaling that they need more good data to be ready to support a rate cut. Further signs of slowing inflation, coupled with a slowing labor market, would likely leave the Fed in a position to cut rates at its September meeting.
According to the CME FedWatch tool, traders are all set to cut rates next month — the question is how much. More than half of bettors are betting on a bigger cut of 50 basis points, while the rest are still on a 25-basis-point cut.
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