World Stocks Rally as Inflation Slows at Home

World stocks rose this week, buoyed by new data showing the U.S. inflation rate is slowing enough to take the steam out of the central bank’s campaign to raise benchmark interest rates. 

As of Friday afternoon, the MSCI World Equity index, which tracks equity performance in 23 developed markets, had climbed more than 3% this week, reaching a new high since April 2022. London’s FTSE 100 ended the week up 2.4%.

Investors are rallying around foreign markets because new data shows the Federal Reserve’s rate hikes seem to be doing their job: quelling what had been four-decade high inflation as recently as last year. The latest inflation rate makes it less likely that the Federal Reserve will raise its benchmark fed funds rate much more this year. 

“We’re probably closer to the end of the cycle,” Union Bancaire Privée Chief Investment Officer Norman Villamin told Reuters.

Traders are betting the Fed will raise it 0.25 percentage point on July 26, but the chances for another rate hike at any point later in the year were under 30%, the CME FedWatch tool showed Friday. 

Data released Wednesday showed that U.S. consumer prices are growing at their slowest rate in more than two years. The consumer inflation rate was 3% in June, down from 4% in May and as high as 9.1% — the highest since 1981 — last year. Wholesale price increases were also slowing, rising 0.1% in June from the previous year, compared to May’s 0.9% bump.