US inflation data for June delivered positive news for potential interest rate cuts. It showed a 0.1% m/m decline, while the market expected a 0.1% m/m increase. Much of the decline was related to energy prices, which fell 2% m/m, while the increase in shelter inflation, at +0.2%, was more muted than in previous months. As a result, on an annual basis, US headline inflation is down to 3% and core inflation to 3.3%. Although this is a little high compared with the US Federal Reserve target of 2%, it opens the possibility that the Fed will start to cut rates in September and cut again before the end of this year. An easing of US interest rates will bring relief to other central banks as well as to financial markets.

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