U.S. consumer prices rise slightly in July, easing inflation concerns
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- U.S. Bureau of Labor Statistics reported the Consumer Price Index edged up 0.1% in July after dropping 0.4% in June — the first monthly decline in six years — with the 12-month rate at 3.4%, down from 3.5%.
- Core CPI (excluding food and energy) climbed 0.2% monthly and 2.5% over 12 months, landing exactly on the 0.1% headline and 0.2% core forecasts from Reuters-polled economists.
- Financial markets priced roughly a 46% chance of a Fed rate hike at the September 15-16 meeting before the CPI release, per CME's FedWatch tool, with August CPI and employment data still to come.
- The Federal Reserve left its benchmark overnight rate at 3.50%-3.75% last month and tracks the PCE price indexes for its 2% inflation target rather than the CPI.
- Economists warned the U.S.'s net-exporter status and drawdowns of petroleum inventories cannot indefinitely cushion the oil-price shock from the Middle East conflict, since stockpiles eventually need replenishing.
- President Trump called Iran "devious negotiators" in a Monday-released interview and framed his options as letting Tehran fail economically or hitting it "really, really hard."
- Wage growth continues to lag consumer prices, fueling cost-of-living frustrations that threaten Republican chances in November's midterm elections and undercut Trump's 2024 promise to lower inflation.
Why it matters: Combined with last week's surprise job losses, this mild inflation print likely pushes the Fed further from a September rate hike, giving consumers and markets a reprieve. But with 12-month CPI still running 1.4 percentage points above the Fed's 2% target and wages trailing prices, the political damage to Trump and Republicans over cost-of-living grievances persists ahead of midterms that decide control of Congress.
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