First Fed funds rate hike likely in September

U.S. CPI data for July and minutes of FOMC meeting are macro highlights today. The Core CPI inflation has shown signs of bottoming lately and another solid print is expected. 

"A 0.2% m/m increase is anticipated which would take annual core inflation to 1.9%. Despite the drop in oil prices, the headline inflation likely increased 0.3% m/m and 0.3% y/y as gasoline prices have not yet reacted to the drop in oil prices", estimates Danske Bank. 

In a recent speech, vice FOMC Chair Stanley Fischer stated his concern over the low level of inflation, but if core inflation remains solid m/m these worries should ease. The FOMC added the word 'some' to the phrase 'further improvement in the labour market' in relation to what is needed to trigger a first rate hike.

"Our interpretation of this change is that labour market data would have to worsen for the Fed to take its finger off the trigger while a continuation of the recent trend would be enough for the Fed to pull. We continue to see the first Fed funds rate hike coming in September, but the risk is that it comes later", says Danske Bank.