US July inflation likely steady as Fed faces battle to justify higher rates: RBC
Investing.com -- U.S. inflation data due later this week is likely show that inflation"held steady" in July, RBC estimates, underpinned by a narrowing source of price pressures just as the Federal Reserve faces an"increasingly difficult" task to justify higher for longer interest rates.
"That should reassure the Fed that those annual rates will continue to move lower," it added, as factors putting upward pressure on inflation have narrowed. On the economic front, there's little to suggest that the Fed should hit the panic button in the wake of rent jobs-led growth scare, but the U.S. central bank's higher for longer rate regime is becoming difficult to justify.
The Fed believes the current neutral rate, one that neither boosts nor holds back economic growth, is 2.5%, which is nearly 300 basis points below the current rate of 5.25% to 5.5%, or 5.375% at the midpoint.
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