The Fed's Indifference to Rising Inflation and Its Impact on Markets

The consumer price index (CPI) is expected to show a modest monthly gain in July, with the annual inflation rate moving higher. However, these figures are not expected to significantly impact Federal Reserve policy. Policymakers understand that the higher inflation rate is largely due to tough year-earlier comparisons, and they have signaled a wait-and-see approach to rate hikes. The market reaction to the CPI report has been mixed, with the S&P 500 pulling back but still near 52-week highs.