Expected U.S. and Chinese inflation data weigh on market performance

Will U.S. inflation figures regain their upward pace?
Expected U.S. and Chinese inflation data weigh on market performance
Market inflation

Markets are focused on inflation data from the world’s two largest economies.

U.S. inflation data is due on Thursday, and core inflation is expected to rise to 4.7 percent year-on-year in July. China’s July inflation report is also due on Wednesday, and traders expect further signs of slowing inflation in the world’s second-largest economy.

On the eve of the release of the US inflation report, Federal Reserve member Michelle Bowman pushed back against rising hopes on Wall Street that the central bank could almost end the rate hike.

She warned that raising multiple interest rates may be required to bring inflation back to healthy levels.

“We’ve made progress in lowering inflation over the past year, but inflation is still much higher” than the Federal Reserve’s 2 percent target, Bowman said Monday at an event in Atlanta.

Read: Intense corporate week ahead for GCC amid global inflation concerns

Bowman, one of the most hawkish members of the Fed’s interest rate fixing committee, noted that the labor market “remains tight, with job opportunities still far exceeding the number of workers available.”

“Given these developments, I supported the Fed’s funds rate hike at our July meeting, and I expect that additional increases are likely needed to bring inflation down to the FOMC target,” she said.

Conversely, many investors and some leading economists expected the Fed to raise interest rates only once, or perhaps not once.

After Friday’s “moderate” jobs report, which showed that employment in July was not too high, but also not too low — economists at Wildemann Sachs wrote in a note to clients that they continue to expect that the Fed “will determine that the final rally is unnecessary” due to cold inflation.

The Fed Governor made similar remarks in a speech Saturday in Colorado Springs, Colorado.

Goldman Sachs economists wrote, “We expect lower core inflation to outweigh mid-year flexibility in growth and wage data.”

Meanwhile, the New York Times quoted the president of the Federal Reserve Bank of New York, John C. Williams, as saying that he believes that what the central bank is doing to calm the economy is approaching its peak, and that he expects interest rates to start falling next year depending on economic data.

In an interview with the newspaper, Williams said inflation was falling as hoped, and that while he expected unemployment to rise slightly as the economy cooled, it was not clear.


On Wednesday, China’s inflation figures showed a decline in consumer prices amid concerns about the outlook for the world’s second-largest economy.

China’s economy rebounded strongly in the first quarter after strict pandemic-era restrictions were abruptly removed late last year. However, the recovery has faltered in recent months as demand at home and abroad has weakened.

Authorities have launched a series of policy measures in recent weeks to support the weak recovery; although the details have been minimal, investors expect more to come.

Bloomberg reported earlier this week that China’s appetite for fuels and other oil-derived products such as plastics may have peaked this year as economic woes in the top oil-importing country continue to fully recover from Zero Covid policies.

While recent major figures for Chinese crude imports pointed to strong oil demand, much of that supply was stored rather than converted into gasoline and diesel, according to analysts.

This year, the country’s economic recovery continues to show signs of pressure through weak indicators in the manufacturing and infrastructure sectors, weighing on the outlook for goods.

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