Global markets fall as US inflation data approaches
Date
8/13/2024 6:04:09 AM
(MENAFN) The weak U.S. jobs report from last week triggered a significant decline in global stock markets, leaving investors anxiously awaiting the upcoming U.S. inflation figures scheduled for release this week. Economists anticipate that consumer prices in the U.S. rose at an annual rate of 3 percent in July, maintaining the same pace as the previous month. However, core inflation, which excludes volatile food and energy prices, is expected to ease slightly to 3.2 percent from 3.3 percent in June. Despite the Federal Reserve's maintenance of interest rates at a 23-year high, core inflation has remained persistently high.
Markets are particularly sensitive to any signs of renewed inflationary pressures, which could provoke significant reactions. According to Citigroup analysts, an unexpected increase in inflation could lead to a surge in market volatility, including higher bond yields and a potential reversal of anticipated rate cuts by the Federal Reserve. Following the August 2 jobs report, investors had increased their expectations for Fed rate cuts, contributing to a sharp drop in global stock markets. Although traders have tempered their expectations since then, they still foresee the Fed implementing a substantial rate cut this year, with a possible reduction of half a percentage point in one of its remaining meetings.
In the UK, similar inflation concerns may prompt the Bank of England to adopt a more cautious approach in its monetary policy decisions, adding another layer of uncertainty to the global economic outlook.
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