U.S. consumer prices rose moderately in July, with the Consumer Price Index (CPI) increasing 0.2% month-over-month and 2.7% annually—matching economist forecasts. However, core CPI, which excludes volatile food and energy costs, climbed 0.3%, its largest monthly gain since January, partly due to rising import tariffs. Year-over-year, core inflation edged up to 3.1%, reinforcing concerns about lingering price pressures despite an overall cooling trend.
Financial markets reacted positively to the data, with S&P 500 futures ticking higher and the dollar dipping slightly. Bond yields held steady, while analysts debated the Federal Reserve’s next move. Tom Porcelli, chief U.S. economist at PGIM, cautioned that tariff-related inflation may still be building, suggesting peak price pressures could arrive later this year. Still, he maintained his expectation of a September rate cut, noting that businesses have so far absorbed much of the tariff impact through inventory management.
The report bolstered hopes that inflation is gradually approaching the Fed’s 2% target, increasing the likelihood of monetary easing. Adam Sarhan of 50 Park Investments called the data “bullish,” pointing to last week’s softer jobs numbers as further evidence for rate cuts. He predicted at least two cuts by year-end, with more possible if economic weakness persists. Meanwhile, Janney Montgomery Scott’s Guy LeBas described the figures as “unconcerning,” suggesting they solidify the case for a September policy shift absent major surprises in upcoming data.
With the Fed’s next meeting just weeks away, analysts will scrutinize August inflation and employment figures for confirmation of the disinflation trend. While risks remain—particularly from trade policy—the latest CPI reading keeps the central bank on track to begin lowering borrowing costs this fall, offering potential relief to consumers and investors alike.