CPI Report Indicates Possible Pause in Rate Hikes

After a chaotic ending the previous week, the market has taken a breather. The week began with 10-year yields around 4%, and despite the highly anticipated Consumer Price Index (CPI) report on Thursday morning, yields have remained virtually unchanged. Earlier in the week, Fed Governors on the speaking circuit reiterated their view of policy remaining restrictive, but the Thursday CPI report may have cast doubt on this stance. The report confirmed the persistence of a deflationary trend, showing a softer year-over-Year CPI print.



This data strengthens the market's belief that the Fed will pause rate hikes at the upcoming September FOMC meeting. The Federal Reserve's ideal outcome has always been achieving a "soft landing" for the economy, and with inflation on the decline, combined with the continued strong gains in the labor market and wages, this outcome appears increasingly within reach with each economic data release.