- U.S. consumer prices rose by 0.1% in July, matching expectations, with annual inflation now at 3.4%.
- Core CPI increased by 0.2% monthly and 2.5% annually.
- Traders have reduced the odds of a September Fed rate hike to 42%.
- In June, the CPI fell by 0.4%, setting the stage for the July report.
- Analysts had expected a 0.1% rise in July CPI following the June decline.
Consumer prices in the U.S. rose by 0.1% in July, according to the Bureau of Labor Statistics, keeping the annual inflation rate at 3.4%. This modest increase follows a 0.4% decline in June and reflects a broader trend of easing inflationary pressures.1267
Excluding food and energy, the core Consumer Price Index (CPI) rose 0.2%, with shelter costs contributing significantly to the overall increase. Shelter accounted for about two-thirds of the headline increase, as both food and shelter saw 0.1% increases in July.34
Despite the uptick, energy prices dropped 1.5% for the month, following a 5.7% decrease in June. However, energy prices remain volatile, with an annual increase of 14.7% due to previous sharp gains.
Following the inflation report, traders reduced the odds of a Federal Reserve rate hike in September to 42%, reflecting a cautious approach to monetary policy. “In-line inflation will keep the 'no need to hike rates' narrative intact,” said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.5
The Federal Open Market Committee will meet again in September, with additional inflation data expected before their decision. “Unless those numbers tell a much different story, the Fed will likely still be in a position to leave rates unchanged next month,” Zentner added.
“Core CPI, excluding food and energy, rose 0.2% monthly and 2.5% annually, with shelter costs accounting for about two-thirds of the headline increase. Energy prices dropped 1.5% for the month, but the sector still saw a 14.7% annual gain.”
CNBC
