U.S. Inflation Update for July: CPI and Core CPI Insights

U.S. Inflation Update for July

In July, inflation in the United States aligned closely with forecasts, setting the stage for the Federal Reserve to potentially initiate interest rate cuts during its upcoming meeting in mid-September. According to a report released by the U.S. government on Wednesday morning, the Consumer Price Index (CPI) increased by 0.2% in July. This marks a rebound from a 0.1% decline in June and meets expectations of a 0.2% increase.

On a year-over-year basis, the CPI rose 2.9%, slightly below the anticipated 3% and consistent with June’s 3%.

The core CPI, which excludes the volatile food and energy sectors, also increased by 0.2% in July, aligning with expectations and a modest rise from 0.1% in June. Year-over-year, the core CPI registered 3.2%, matching forecasts and showing a slight decrease from June’s 3.3%.

Following the report, the price of bitcoin (BTC) experienced a modest uptick, trading at around $61,200.

Prior to the release of this data, speculation surrounding the Federal Reserve’s next move regarding its benchmark federal funds rate was already heating up. The odds indicated a zero percent chance that the current rate range of 5.25%-5.50% would remain unchanged, according to the CME FedWatch tool, which analyzes positions in short-term interest rate markets. Notably, the gauge revealed a 52.5% probability of a 50 basis point cut compared to 47.5% for a 25 basis point reduction.

Given the current data, it seems unlikely that these probabilities will shift significantly. Looking ahead, the next major reports in the U.S. macroeconomic landscape include initial jobless claims and retail sales, both scheduled for tomorrow. Additionally, the Federal Reserve’s Jackson Hole Economic Symposium is approaching, where past chairs have occasionally used the platform to announce or hint at significant policy changes.