Fed: September hike expectations pushed back by softening inflation - ANZ

The recent softness in US inflation has pushed back against expectations of a September Fed rate hike, which is now only 3.5 bps priced, points out analysis team at ANZ.

Key Quotes

“This week’s data will be important in gauging the strength of activity at the end of Q2 and underpinning expectations of a December rate hike (14bps priced). The Atlanta Fed GDPNow model is currently estimating growth at 2.9% in Q2. Both the June ISM (55.0) and final Markit (52.1) manufacturing data are published tonight and are expected to show solid growth continues. The June ISM non-manufacturing index is expected at 56.5 (56.9), which also would imply solid growth in the broader economy. From a cyclical perspective that is encouraging and would indicate that Q3 should start with solid growth momentum and should reinforce confidence that inflation will return to target gradually over the medium term.”