New York stock market ‘rally’ after inflation data

At the close, the Dow Jones index gained more than 500 points and rose 1.63 percent to 33,309.51 points.

The S&P 500 index rose 2.13 percent to 4,210.23 points, reaching its highest level since the beginning of May, while the Nasdaq index rose 2.89 percent to 12,854.81 points.

After the inflation in the USA, which reached its peak of 41 years with 9.1 percent in June, slowed down in July, the indices followed a positive course throughout the day as expectations that the US Federal Reserve (Fed) would be less aggressive in interest rate hikes.

According to the data announced today in the country, the Consumer Price Index (CPI) did not change on a monthly basis in July, but increased by 8.5 percent on an annual basis, below the expectations.

Core CPI, which does not include variable energy and food prices, rose by 0.3 percent monthly and 5.9 percent annually in the same period, below market expectations.

US President Joe Biden, in his statement after the announcement of the inflation data, stated that they saw some signs that the inflation may start to subside in the country, and said, “We may face a little more headwinds in the coming months. Our work is not done yet.” said.

Analysts said that the latest data on inflation is the first sign of significant relief, and may ease some of the pressure on the US Federal Reserve (Fed) to increase interest rates aggressively.

After the inflation data, it was predicted that the Fed will increase interest rates by 50 basis points with a probability of 58.5 percent and by 75 basis points with a probability of 41.5 percent at the September meeting.

While the statements of Fed officials kept their place in the focus of the markets, Chicago Fed President Charles Evans noted that the latest data on inflation was the first positive reading on price pressures since the Fed started its tightening policy.

Emphasizing that inflation is still “unacceptably high”, Evans said that the Fed’s policy rate, which is currently in the range of 2.25-2.5%, will increase to 3.25-3.5 percent this year and to 3.75 percent by the end of next year. He said he expects it to increase to 4 range. Evans stated that he expects inflation to approach 2.5 percent next year, and that he does not expect the economy to slow down significantly in the near future.

Minneapolis Fed President Neel Kashkari also stated that interest rates should be increased further even if it causes a recession.

Expressing that the Fed is “far away from declaring victory” on inflation, Kashkari noted that such a rapid increase in interest rates may drag the economy into recession, and that a recession may occur in the near future. Kashkari argued that market expectations for rate cuts to begin early next year are unrealistic.

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