A press conference featuring Federal Reserve Chairman Jerome Powell appears on a monitor at the New York Stock Exchange. AP
A press conference featuring Federal Reserve Chairman Jerome Powell appears on a monitor at the New York Stock Exchange. AP

Hopes for US interest rate cuts grow after latest inflation report



Inflation in the US eased more than expected last month, fuelling hopes that the Federal Reserve is close to cutting interest rates.

The Consumer Price Index (CPI) decreased 0.1 per cent in June, data from the Labour Department showed. On an annual basis, CPI inflation rose 3.0 per cent, down from 3.3 per cent in May. It marked the third straight month of moderating inflation.

Core inflation, which does not include food and energy, fell from 3.4 per cent to 3.3 per cent.

Economists had predicted headline CPI inflation would drop to 3.1 per cent on an annual basis, according to a median estimate compiled by FactSet. Core CPI was expected to rise 3.4 per cent.

“This morning's CPI report was arguably the most encouraging one the FOMC has received since it began its inflation fight nearly two and a half years ago,” Wells Fargo economists Sarah House and Michael Pugliese wrote to investors, referring to the policy-setting Federal Open Market Committee.

The Fed has held its benchmark rate steady at 5.25 to 5.50 per cent since last July. Central banks in the UAE and Saudi Arabia, which follow the Fed's lead, have also maintained their own interest rates since then.

Fed Chairman Jerome Powell told politicians in congressional testimony on Wednesday that he has seen “considerable progress” in bringing inflation closer to the central bank's 2 per cent target, but added “more good data” was required before moving on rate cuts.

While he declined to offer a timetable on when this would happen, traders expect the Fed will make an initial rate cut in September before potentially two additional quarter-point cuts in their November and December meetings, according to CME Group data.

Mahmoud Alkudsi, senior market analyst at ADSS, said “expectations are growing for an impending monetary policy pivot”.

“With inflation cooling off from the higher levels earlier in the year, the Federal Reserve will gain greater confidence in its current road map, with the coveted 2 per cent target growing closer,” Mr Alkudsi wrote to clients.

And in a further clue that the Fed sees the economy as cooling, Mr Powell described the labour market as “strong, but not overheated”. While the US jobs market added a healthy 206,000 positions last month, the unemployment rate unexpectedly ticked up to 4.1 per cent.

Unlike other central banks, the Fed has a dual mandate of maintaining price stability and maximum employment.

Mr Powell touched on the two-sided risks the US central bank faces. Holding rates for either too long or not long enough both threaten the health of the economy, either by steering it into a recession and causing an unwanted sharp rise in unemployment, or seeing inflation rise again.

“We're very much aware that we have two-sided risks now … and we're determined to balance those as best we can,” Mr Powell said.

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Company name: Revibe
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Founders: Hamza Iraqui and Abdessamad Ben Zakour
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Director: Steven Spielberg
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COMPANY PROFILE

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Started: 2018

Founders: Roman Axelrod, Valentyn Volkov

Based: Dubai, UAE

Industry: Smart contact lenses, augmented/virtual reality

Funding: $40 million

Investor: Opportunity Venture (Asia)

Company Profile

Company name: Namara
Started: June 2022
Founder: Mohammed Alnamara
Based: Dubai
Sector: Microfinance
Current number of staff: 16
Investment stage: Series A
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Starring: Glenn Powell, Daisy Edgar-Jones, Anthony Ramos

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Company profile

Company name: Fasset
Started: 2019
Founders: Mohammad Raafi Hossain, Daniel Ahmed
Based: Dubai
Sector: FinTech
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2017: Amazon acquires Whole Foods for $13.7 billion, its biggest acquisition

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Started: 2017
Founders: Dr Noha Khater and Rania Kadry
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Company name: Klipit

Started: 2022

Founders: Venkat Reddy, Mohammed Al Bulooki, Bilal Merchant, Asif Ahmed, Ovais Merchant

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Funding: $4 million

Investors: Privately/self-funded

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Name: Direct Debit System
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Based: UAE with a subsidiary in the UK
Industry: FinTech
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What is Genes in Space?

Genes in Space is an annual competition first launched by the UAE Space Agency, The National and Boeing in 2015.

It challenges school pupils to design experiments to be conducted in space and it aims to encourage future talent for the UAE’s fledgling space industry. It is the first of its kind in the UAE and, as well as encouraging talent, it also aims to raise interest and awareness among the general population about space exploration.

Updated: July 12, 2024, 3:55 AM

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