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Quiet Week Highlighted By Increasing Trade Tensions

Another quiet week ended with yields only slightly changed, as the week's economic indicators arrived largely as forecast.  Inflation readings were roughly in line with expectations, as consumer prices increased in June by 0.1%, while producer prices rose at a slightly higher 0.3% rate.  The producer price index was pushed higher in part by freight transportation and fuel costs.  Economists expect consumer inflation readings to head higher as the White House announced plans to impose additional tariffs on Chinese goods. 

The potential new tariffs, which were announced on Tuesday, would impact an additional $200 billion in imported Chinese products.  In combination with the recently finalized tariffs, this would impact nearly 90% of Chinese exports to the US.  Since a sizable increase in inflation could force the Fed's hand to raise rates more aggressively, market participants are carefully monitoring incoming inflation data as well as future trade policy developments.

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