Dollar sinks as inflation, jobless claims data cement Sept Fed pause

NEW YORK: The dollar fell on Thursday after data showed US consumer prices rose modestly last month, while initial jobless claims gained in the latest week, reinforcing expectations the Federal Reserve will pause interest rate hikes at the next policy meeting.

The consumer price index (CPI) rose 0.2% last month, matching the gain in June, the Labor Department said on Thursday. The CPI climbed 3.2% in the 12 months through July, up from a 3.0% rise in June, which was the smallest year-on-year gain since March 2021.

Excluding the volatile food and energy categories, the CPI gained 0.2% in July, the same as the increase in June. In the 12 months through July, core CPI grew 4.7% after rising 4.8% in June.

“Despite the annualised headline CPI rate re-accelerating slightly in July, the gentle 0.2% monthly acceleration for both core and headline CPI should soothe markets and the Fed,” said Nathaniel Casey, investment strategist at wealth management firm Evelyn Partners.

“There is still one more inflation and job report to come before the next FOMC meeting on the 20th of September, so while committee members are unlikely to make their next decision from this CPI print alone, it is yet another step in the right direction.”