Fed expected to stick with hawkish rate hikes until data show further slowing in inflation

cnbc.com:

The Federal Reserve is unlikely to pivot from its hawkish interest rate hikes despite positive signs this week that inflation in the U.S. could be easing, according to market strategists.

On Thursday, the producer price index surprisingly fell 0.5% in July from the prior month, compared with an estimate of a 0.2% gain, according to a Dow Jones survey. On an annual basis, the index rose 9.8%, the lowest rate since October 2021.

That followed encouraging data that showed consumer prices rose 8.5% in July. The rate was slightly cooler than the 8.7% expected by analysts surveyed by Dow Jones and a slowing pace from the prior month.

As both CPI and PPI soften, markets have started to moderate their expectations for Fed rate hikes. Still, the positive data doesn't mean it is «mission complete» for the Fed, said Ben Emons, managing director of global macro strategy at Medley Global Advisors.

«If you strip off any of the headline noise, some of the… CPI, even PPI [numbers] show still upward pressures,» he told CNBC's «Squawk Box Asia» on Friday. «The Fed cannot be done here. It probably means that the 75-basis-point rate hike remains on the table.» 

«The pricing on the Fed fund futures and euro-dollar futures shows that we're still more towards the 75-basis-point rate hike. And I think it is because of the guidance that all these Fed speakers keep giving us — 'just don't be complacent here, we're going to continue,'» Emons added. 

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Last week, St. Louis Federal Reserve President James