US stocks gained today as slowing inflation in the US supported expectations that the US Federal Reserve (Fed) could end interest rate hikes soon. The Dow Jones index, which includes shares of thirty leading U.S. companies, gained 0.14 percent today to end trading at 34,395.14 points. The broader S&P 500 index rose 0.85 percent to 4,510.04 points, and the Nasdaq Composite index, which includes many companies in the high-tech sector, rose an even 1.58 percent to 14,138.57 points.
The U.S. Labor Department reported Wednesday that annual consumer price growth in the United States slowed to three percent in June from four percent in May. The inflation rate thus fell for the twelfth consecutive month and is at its lowest since March 2021.
In addition, today’s data showed that US producer prices increased by only 0.1 per cent year-on-year in June, following a 0.4 per cent rise in May. The rate of producer price growth was thus the slowest since August 2020.
The financial markets expect the Fed to raise interest rates by another quarter of a percentage point this month. However, due to easing inflation, expectations are growing that the current cycle of interest rate hikes in the US will end with the July move. “The producer price data further confirms that inflation continues to move in the right direction,” said Edward Jones analyst Mona Mahajan.
On the foreign exchange market, the US dollar fell to a new 16-month low against the euro today on the prospect of ending US interest rate hikes. Around 22:00 CET, the European currency gained about 0.9 percent to $1.1225.
The Fed started raising interest rates last March to bring inflation under control. Its base rate has since risen by five percentage points. It is now in the range of 5.00 to 5.25 per cent and is the highest since 2006.
Last month, the European Central Bank (ECB) raised its key interest rate by a quarter of a percentage point to four percent. It hinted at the possibility of further monetary tightening. According to a flash estimate by Eurostat, inflation in the euro area fell to 5.5 percent in June from 6.1 percent in May.
Source: CTK
