US inflation eases a fourth month

US inflation rate unexpectedly falls

U.S. inflation cooled for the fourth consecutive month in July, with the annual rate dipping to 2.9%, the lowest since March 2021. This is a slight decrease from June's 3% and fell short of market expectations, which also stood at 3%. On a monthly basis, the Consumer Price Index (CPI) rose by 0.2%, recovering from a 0.1% decline in June and meeting forecasts. The increase was largely driven by a 0.4% rise in shelter costs, which accounted for nearly 90% of the total monthly gain. Core inflation, which excludes volatile food and energy prices, also eased to 3.2%, the lowest since April 2021, down from 3.3% in June and in line with expectations. The monthly core inflation rate edged up to 0.2%, consistent with forecasts.

UK CPI rises to 2.2% in Jul

In the UK, the Consumer Price Index (CPI) rose to 2.2% year-on-year in July, slightly below the anticipated 2.3%, but up from 2.0% in June. Core CPI, which excludes energy, food, alcohol, and tobacco, eased to 3.3% year-on-year, the lowest level since September 2021, down from 3.5% in June and just below expectations of 3.4%. The annual rate for CPI goods moved from a contraction of 1.4% to a narrower negative 0.6%. However, the annual rate for CPI services decreased from 5.7% to 5.2%. On a monthly basis, CPI fell by 0.2%.

RBNZ surprises with rate cut, signals another reduction this year

The Reserve Bank of New Zealand (RBNZ) unexpectedly cut its Official Cash Rate (OCR) by 25 basis points to 5.25%, surprising markets. The central bank also released new economic projections, signaling the potential for another rate cut later this year, followed by a total reduction of 100 basis points throughout 2025. RBNZ officials emphasized that future rate adjustments will depend on maintaining inflation expectations around the 2% target and ensuring pricing behaviors align with a low-inflation environment.

Meeting minutes revealed confidence that inflation will sustainably return to target within a reasonable timeframe. The committee noted that with headline CPI inflation expected to return to the target band by the September quarter and growing excess capacity supporting a continued decline in domestic inflation, there was room to "temper the extent of monetary policy restraint." According to the new projections, the OCR could drop to 4.9% by Q4 2024, 3.8% by the end of 2025, and eventually settle at 3.0% by mid-2027. Annual CPI inflation is forecasted to remain between 2.2% and 2.4% before stabilizing at 2.0% by Q2