Three US Economic Data Points Strengthen the Case for a Fed Rate Hold in September

According to Ecoiran, three major US economic data points released over the past three days have given a fresh picture of the Federal Reserve's policy path, currently reinforcing the case for holding rates steady at the September meeting. July consumer inflation came in below market expectations, with core inflation up 0.2 percent month on month, taking annual core inflation to 2.5 percent and headline inflation to 3.4 percent. A day later, the producer price index was unchanged month on month in July, with the annual rate easing to 4.7 percent from 5.5 percent in June. By contrast, July retail sales fell 0.6 percent, against a market expectation of 0.1 percent growth.

Based on the same three data points, Goldman Sachs, in a note reported by Arzdigital, said its base case is now for the Fed to hold rates steady in September. Jan Hatzius, Goldman Sachs's chief economist, cited weak retail sales and employment data alongside easing inflation as the main reasons behind the forecast. Per CME FedWatch data, traders now price just a 30.6 percent probability of a 25 basis point Fed rate hike in September.