U.S. July CPI to Strike on Wednesday, Goldman Sachs: Core Data Will Be Below Expectations

According to the Zhitong Finance and Economics APP, the US Consumer Price Index (CPI) for July is set to be released on Wednesday evening, expected to further prove that inflation is no longer a top concern for the market. Goldman Sachs economists predict that the core CPI in the US for July will increase by 0.16%, lower than the general expectation of 0.2%, with many institutions also releasing their forecasts.

The Goldman Sachs team believes that core goods will continue to decline, with an expected decrease of 0.11% on a month-on-month basis. However, the 0.23% increase in the service sector will partially offset this impact, with the main driver being the owner's equivalent rent, expected to rise by 0.29%, and hotel prices to increase by 0.50%.

Another driving factor is car insurance, as some eye-catching renewal rates have severely impacted Americans, making this car insurance as well-known as headline news.

According to FactSet's general expectation, following a 0.1% decrease in June, the CPI for July is expected to increase by 0.2% on a month-on-month basis, keeping the annual inflation rate unchanged at 3%. The core inflation rate for July is expected to increase by 0.2% on a month-on-month basis, lower than June's 0.1%, while the annual inflation rate is expected to slightly decrease from 3.3% in June to 3.2% in July.

Lydia Boussour, Senior Economist at Ernst & Young, stated that the July CPI report "will provide more evidence that the slowdown in inflation is continuing and is on track." Based on this result, the report will "strengthen the Fed's case for cutting rates at the September meeting."

In the bond futures market, according to the FedWatch tool from the Chicago Mercantile Exchange, the probability of a rate cut in September is 100%. However, following the soft job report in July and the market turmoil at the beginning of last week, there is still a divergence of views on whether the Fed will lower rates by 25 basis points or a more aggressive 50 basis points.

The inflation trend is crucial to whether the Fed is willing to cut rates, but monthly inflation data is unstable. José Torres, Senior Economist at Interactive Brokers, stated that after two months of strong inflation performance in May and June, the July CPI report is expected to be "moderate."

Torres' data seems to be in line with the general expectation. He predicts an overall CPI monthly growth of 0.2%, annual growth of 3%, core CPI monthly growth of 0.3%, and annual growth of 3.3%. He said, "Energy is driving inflation. Gasoline prices have slightly increased, and we expect new and used car prices to rise as well. Part of the reason is the decrease in interest rates."

In June, housing prices rose by 0.2%, and Torres believes this increase was "very weak, well below trend levels." Therefore, he expects housing prices to rebound in July, along with transportation services and healthcare prices