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Inflation Just Hit 2.7%. What Traders Should Really Be Watching

The latest US inflation figures confirm what markets had only started to suspect — inflation is not done yet. June’s Consumer Price Index (CPI) rose 2.7% year-on-year, its highest reading since February. Although the monthly increase of 0.3% met forecasts, the annual rise suggests inflationary forces are regaining traction after months of disinflationary momentum. What’s changed? New US tariffs, a shifting cost base, and a market beginning to reprice risk — all coming together in a single data point. At EBC, we believe the headline figure only tells part of the story. The focus now needs to shift from past prints to forward signals. Tariffs Start to Show in the Numbers Economists and traders alike are re-evaluating the timeline for inflation moderation. The 2.9% core CPI increase may look moderate, but the drivers behind it are starting to worry analysts. Cost pressure from tariffs is no longer hypothetical. The US has rolled out new trade measures on goods from over 20 countries, and their effects are now showing up in data. “The tide is turning. What we're witnessing is the first real hints of tariffs causing an inflationary impact,” said David Barrett, CEO of EBC Financial Group (UK) Ltd. “While the figures are still within manageable levels, forward-looking traders should be asking what comes next — not just in the data, but in Fed policy and capital flows.” Analyst estimates suggest that up to a third of June’s CPI increase may already be linked to tariff pass-through. Many companies are still running on pre-tariff inventory, which means the bulk of the price shift is still to come. As we see it, Q3 is shaping up to be a crucial window for re-pricing across retail and wholesale supply chains. The Fed Holds — For Now Market pricing currently shows a 97% probability that the Federal Reserve will leave interest rates unchanged at 4.25%–4.50% at its next meeting on 29–30 July. But stability in July does not imply certainty beyond that. Barrett cautioned, “Inflation is rising, but not running away. The Fed has little incentive to move hastily. We expect a holding pattern in July, but if CPI and wage data heat up again in August, the conversation could shift swiftly from one of patience to a pre-emptive one.” For traders, this means staying alert to leading indicators. The Fed’s preferred inflation gauge, the Core PCE Price Index, is due later this month — and that may become the real trigger for future rate shifts. Market Reactions Signal Caution, Not Fear The immediate market response has been measured but telling. Treasury yields nudged higher. The dollar strengthened. Equities moved sideways. Risk assets didn’t panic, but they didn’t rally either. “This is not a risk-off moment, but it's also not risk-on,” Barrett explained. “For traders and investors, this is the zone where macro strategy matters most — FX pairs, rates products, and inflation-sensitive sectors will likely see more two-way action over the summer.” We are already seeing increased volatility in commodities and currency markets. “The re-acceleration of inflation — especially through tariffs — injects fresh volatility into gold and currency markets. Traders should expect choppier price action and re-think positioning around key macro catalysts,” Barrett added. Why Q3 Is About Interpretation, Not Just Data Inflation’s return may be gradual, but its implications are anything but. The current environment demands more than headline watching. Traders should be asking deeper questions: How are inventories being replenished? Where are the bottlenecks forming? What will wage data tell us in August? Barrett summed it up: “Q3 won't be shaped by headline prints alone — it'll be shaped by interpretation. The traders who stay focused, flexible, and forward-looking will find opportunities where others hesitate.” From our perspective, this is the moment to recalibrate — not retreat. The CPI may say 2.7%, but the market message is more nuanced. At EBC, we remain committed to helping our clients navigate it with precision and foresight. Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

EBC Financial Group

Disclaimer:

Investment involves risk. The content of this report is not an investment advice and does not constitute any offer or solicitation to offer or recommendation of any investment product.

Publication date:

2025-08-04 07:42:57 (GMT)

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