After opening the day marginally higher, stock markets in India have continued their momentum. Sectoral indices are trading on a positive note with stocks in the realty sector, auto sector and healthcare sector witnessing maximum buying interest.
The BSE Sensex is trading up 131 points (up 0.4%) and the NSE Nifty is trading up 36 points (up 0.4%). The BSE Mid Cap index is trading up by 0.8%, while the BSE Small Cap index is trading up by 0.9%. The rupee is trading at 63.97 to the US$.
In the news from global financial markets, data showed US consumer spending rose slightly less than expected in July. Also, annual inflation advanced at its slowest pace in more than a year.
The Commerce Department said consumer spending, which accounts for more than two-thirds of US economic activity, increased 0.3% last month. This compares to a 0.2% gain in June and less than forecasts of 0.4%.
The personal consumption expenditures (PCE) price index excluding food and energy edged up 0.1% in July.
Further, the 12-month increase in the core PCE price index dipped to 1.4%, the smallest gain since December 2015. The index rose 1.5% in the 12 months through June.
The core PCE price index, which is the Fed’s preferred inflation measure, has now risen by the same margin for three straight months. The annual rate has dropped by half a percentage point since February and the PCE price index has undershot the Federal Reserve’s 2% target for the past five years.
The above data suggesting a moderate consumer spending, coupled with the tepid inflation casts doubt on Fed’s decision to raise interest rates at its December policy meeting.
One shall note that Fed policymakers are concerned about the recent decline in inflation in the US. And this means the Fed could further delay an interest rate hike in its upcoming meetings.
Minutes from the Federal Reserve’s July meeting indicated that some members called for halting interest rate hikes until it was clear the inflation trend was transitory.
