KUALA LUMPUR, Sept 8 (Bernama) -- Bursa Malaysia closed almost flat on Tuesday as buying interest rotated away from index heavyweights towards smaller-cap construction stocks, with sentiment affected by geopolitical uncertainty, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 0.39 of a point to 1,714.40 from Monday’s close of 1,714.79. The benchmark index opened 1.65 points lower at 1,713.14 and moved between 1,710.44 and 1,714.50 throughout the trading session. The broader market was almost evenly balanced, with decliners leading gainers 548 to 546, while 598 counters were unchanged, 1,107 were untraded and 25 were suspended. Turnover expanded to 4.13 billion units valued at RM3.14 billion from 3.60 billion units valued at RM2.45 billion on Monday.
Despite concerns over inflation due to Trump's renewed tariff push, the Federal Reserve may still press ahead with interest rate cuts — if the labor market continues to cool.
All Eyes on June CPI
This Tuesday’s release of the June Consumer Price Index (CPI) is expected to show a 0.3% increase, marking the most significant monthly rise since the US ramped up tariffs earlier this year. If forecasts hold, the core inflation rate — which strips out volatile food and energy prices — would tick up to 3% annually, drifting further from the Fed’s 2% target.
But here’s the catch: tariff-related inflation has yet to show major bite.
Why Inflation Hasn't Spiked (Yet)
Economists argue that several factors have blunted inflation so far:
Pre-tariff inventory stocking by importers
The White House’s partial tariff rollbacks
Falling oil prices (down 14% YTD)
A cooling housing market, with rent increases at pre-pandemic levels
While prices of items like tools, furniture, and new cars have edged higher, overall inflation remains muted. Goods prices have risen only 0.3% over the past year — a modest uptick considering prior declines.
Even Fed Chair Jerome Powell told Congress last month that any inflation impact from tariffs is “likely to show up this summer.”
Job Market: The Real Risk
If inflation doesn’t spike dramatically, the Fed’s focus will shift to the weakening labor market:
Private sector hiring in June was the weakest since late 2024
Jobless claims hit a four-year high
Hiring is increasingly concentrated in just one sector: healthcare
This softening trend supports forecasts for a rate cut as early as September, particularly if inflation remains manageable.
Market Expectations
According to Wells Fargo, core inflation may peak around 3.3% by year-end, but it’s expected to fall back to pre-tariff levels by 2026. Citi economists echo this, calling the inflation impact “narrow and short-lived.”
So what’s the Fed’s likely approach?
“The Fed is willing to look past a temporary price bump if the economy needs support,”– Sam Bullard, Wells Fargo Senior Economist
And Wall Street seems to agree: rate cut bets are holding firm.
Takeaway for Investors
Tariffs may nudge inflation higher short term, but the Fed is watching jobs, not just prices. For now, markets are betting that economic weakness will outweigh inflation risks — and that rate cuts are still on the table.
Stay tuned for the June CPI on Tuesday. It could set the tone for Q3.
Comments
Post a Comment