Yellen’s testimony, CPI and jobless claims set stage for rate hike before end-2015

Fed chairperson Yellen's semi-annual testimonies earlier this week hardly deviated from other recent statements and continued to sound cautiously optimistic over the economic outlook.

She saw prospects for further improvement in the labour market and the wider economy, and still expected inflation to return to target over the medium term. Today's release of US inflation data for June will provide another key input into the debate.

The Fed's rate decision seems to be is in line with the Yellen's hints after she sent strong indications that US economic conditions are likely to justify an interest rate hike at some point this year.

While the CPI is not the Fed's preferred measure of inflation - but still valued for its timeliness - today's release is likely to provide evidence that inflation has bottomed out in the US.

Following the rise to 0.0% in May, we expect a further pick-up in headline annual CPI to 0.2% alongside a firming in 'core' inflation to 1.8% from 1.7%.

Initial Jobless Claims in the US decreased to 281K in the week ending July 11 of 2015 from a downwardly revised 296K in the previous week.

We believe all these positive factors are attracting Fed's to act according to the favorable economic environmental conditions; one more probability is that -  considering the fact that why to disrupt the current good shape of economy, Fed may even think to defer the rate hike decision to Christmas seasons as festive package.