Consumer price index data this week provided encouraging signs that American inflation is moving ever closer to the Federal Reserve’s much-discussed 2% target. This fueled speculation about interest rate cuts. The annual inflation rate dropped more than expected to 3% in June 2024, reaching its lowest level since March 2021. Remarkably, the monthly inflation rate showed a contraction of 0.1% for the first time since May 2020. Investors and economists increased their convictions on the Fed's readiness to cut interest rates in September, pushing market-implied odds of a cut to over 90%. A higher-than-expected producer inflation data report Friday did little to alter these expectations significantly, as the latest consumer sentiment report from the University of Michigan confirmed subdued morale and a decline in inflation expectations. In the markets, sectors previously impacted by high interest rates — ...