What's going on?

Inflation data from the US and eurozone out on Friday showed the rate at which the prices of goods and services are rising is below par in both economies � intensifying investor focus on forthcoming decisions from their central banks.

What does this mean?

Despite some recent US inflation data coming in surprisingly strong, the closely watched �core personal consumption price index� only rose 1.6% in July compared to a year before � still stubbornly below the Federal Reserve�s 2% target. Across the 19 European countries that use the euro, meanwhile, inflation remained stuck at just 1% in the year to August � half the level it should be in a healthy economy.

Cutting target interest rates could get inflation back on track: that would make borrowing (and therefore spending) money cheaper and encourage prices to rise. But it�s not that simple. Americans� personal spending rose more than expected in July � and future economic growth largely depends on the uncertain outcome of the country�s trade dispute with China. And Europe�s interest rates are already at zero: some worry that if its central bank resorts to further economic stimulus measures like quantitative easing in September, its options will be limited when things get really hairy.

Why should I care?

For markets: Stocks could get a shot in the arm.
Investors now think there�s a 93% chance the Federal Reserve will follow its historic July decision by cutting US interest rates another 0.25% next month, according to Bloomberg. But there�s a heightened 7% probability that the central bank follows the course some have recommended and increases the size of that cut. Cheaper borrowing would boost company profits � and share prices.

Zooming out: India is under pressure too.
Figures out elsewhere on Friday showed annual Indian economic growth slowed to 5% in the second quarter of 2019 � its slowest pace in six years. The country�s central bank has already slashed interest rates, and it�s now merging state banks in an attempt to boost growth…