US inflation hits Fed cuts expectations after July’s Producer Price Index (PPI) rose 0.9% month-on-month. This was well above forecasts. The increase lowered the odds of a 50 basis-point cut in September. Markets are now anticipating a 25 basis-point move instead. As a result, analysts say the stronger inflation data highlights ongoing price pressures. These could keep the Federal Reserve cautious about easing policy too quickly.
Asian Markets React to Shifting Fed Outlook
The change in outlook rippled through Asia-Pacific markets. It showed how US inflation impacts Fed decisions and, in turn, global sentiment. Japan’s Nikkei 225 rose 1.6% on strong GDP growth. Meanwhile, Hong Kong’s benchmark slipped 1.1% and Australia’s index gained 0.7%. In China, major indexes rose nearly 0.8%. This came as weak domestic data increased speculation about stimulus. Notably, market strategists said US inflation readings often influence risk appetite and capital flows in export-heavy economies.
Global Moves in Currencies and Bonds
The PPI surprise pushed the US dollar lower and Treasury yields down. Investors quickly adjusted interest rate bets. Several Asian currencies posted gains as a result. Economists stress that higher inflation in the US — even when it hits Fed cuts expectations — affects borrowing costs worldwide. It also shapes cross-border investment strategies and demand for safe-haven assets.
Commodities and Crypto Gain Ground
In commodities, Brent crude slipped 0.3% ahead of a planned US–Russia meeting. Gold rose 0.3% as traders weighed US inflation’s effect on Fed policy. Bitcoin briefly touched a record above $124,000 before easing. It later recovered 0.8%. Ether gained 1.7% on improving risk sentiment. Consequently, analysts observed that US price pressures can influence commodity demand forecasts and sentiment in alternative assets.
Outlook Ahead
With US inflation hits Fed cuts momentum dominating headlines, markets will watch upcoming data closely. Inflation and employment figures will be critical. They will determine whether the Fed maintains its cautious stance. Alternatively, fresh numbers could open the door to more aggressive rate reductions later in the year.
