Fed rate hike expectations for September drop to 38.1% following July CPI data

Summary

U.S. July CPI rose 3.4% YoY and 0.1% MoM, with core CPI at 2.5% YoY, both meeting expectations and confirming a two-month cooling trend Tip Ranks. Following this and a weak non-farm payroll report, market expectations for a September rate hike dropped to 38.1%, with a 61.9% probability of rates remaining unchanged . This shift has boosted the S&P 500 and Nasdaq 100 while providing liquidity relief to the Hong Kong tech sector Tip Ranks.

Impact Analysis

So the market is finally breathing a sigh of relief. The July CPI wasn’t a shocker, but coming on the heels of that weak payroll report, it’s effectively boxed the Fed into a corner for September. We’re seeing the hike probability slide toward 38%, and if PPI continues to underwhelm, that might drop even further Tip Ranks.

The real signal here isn’t just a U.S. soft landing; it’s the massive relief valve opening for USD-denominated liquidity. While the S&P 500 is flirting with highs, the deep value is in the laggards. Look at Hong Kong tech—specifically the Hang Seng Internet ETF. It’s trading at a 22.5x PE compared to the Nasdaq’s 33.5x, yet houses the same AI-capable giants like Tencent and Alibaba Tip Ranks. The market has been so fixated on Fed hawkishness that it’s completely missed the AI optionality in these names. As the ‘higher for longer’ fear fades, I expect a violent mean-reversion here. Bottom line: stay long U.S. tech, but start rotating into H-share tech for the liquidity catch-up.