US markets rise as stage set for fee cuts – newest updates

US stocks rose this afternoon after a new inflation figures reiterated that price pressures are moderating, cementing bets for an interest-rate cut at the Federal Reserve’s upcoming meeting in September.

The Personal Consumption Expenditure (PCE) index, the Fed’s preferred inflation measure, rose 2.5pc in July on an annual basis compared to an economists’ estimate of 2.6pc. On a monthly basis, it rose 0.2pc as expected.

The S&P 500 rose 0.7pc, the Nasdaq rose 1pc and the Dow Jones rose 0.3pc.

Today’s PCE report is the last before the Federal Reserve’s September meeting and follows Fed Chair Jerome Powell’s comments last week expressing support for an imminent policy adjustment.

The new figures underscore that inflation is steadily fading in the United States after three painful years of surging prices hammered many families’ finances. Inflation peaked at 7.1pc in June 2022, the highest in four decades.

In a high-profile speech last week, Fed chairman Jerome Powell attributed the inflation surge that erupted in 2021 to a “collision” of reduced supply stemming from the pandemic’s disruptions with a jump in demand as consumers ramped up spending, drawing on savings juiced by federal stimulus checks.

With price increases now cooling, Mr Powell also said last week that “the time has come” to begin lowering the Fed’s key interest rate. Economists expect a cut of at least a quarter-point cut in the rate at the Fed’s next meeting September 17-18.

With inflation coming under control, Mr Powell indicated that the central bank is now increasingly focused on preventing any worsening of the job market. The unemployment rate has risen for four months in a row.

Isabel Albarran, of City merchant bank Close Brothers Asset Management, said:

Today’s widely anticipated 0.2pc rise in the core US personal consumption expenditure from July is yet another confirmation that we will see a [quarter percentage point] cut from the Fed at next month’s meeting, and underlines the progress made on inflation.

As we look towards the November election, this will no doubt be welcome news to [Kamala] Harris, with a combination of falling inflation and still-strong employment historically favouring the incumbent party.

Trading volumes are expected to thin ahead of an extended weekend due to a public holiday in the US on Monday.