Al-Watani: US inflation slowdown supports Fed's move to hold interest rates steady

Global markets were affected last week by easing inflationary pressures in the United States, continued economic growth resilience in the United Kingdom, and central banks’ adherence to a cautious approach amid geopolitical uncertainty and rising energy prices.

According to the weekly money market report issued by National Bank of Kuwait, while inflationary pressures appear to be receding across major economies, policymakers remain mindful of risks stemming from the conflict in the Middle East and its impact on energy costs.

In the United States, inflation slowed for the second consecutive month in July, with the overall inflation rate, as measured by the Consumer Price Index, declining to 3.4% year-on-year, down from 3.5% in June, while the core inflation rate fell to 2.5%.

Producer price data also indicated a continued easing of inflationary pressures, as the Producer Price Index remained unchanged during the month, supported by a 3.1% drop in energy prices.

These developments bolstered expectations that the US Federal Reserve (the central bank) would keep interest rates unchanged, given that current monetary policy levels suggest sufficient restrictiveness to push inflation toward further declines over time.

At the same time, the US labor market has retained a degree of resilience despite signs of slowing job growth, with initial jobless claims rising marginally to 209,000, while the unemployment rate remained steady at 4.1%.

Although layoff rates remain at low levels, companies have become more cautious in hiring amid rising borrowing costs and ongoing economic uncertainty.