July’s Consumer Price Index showed that inflation accelerated slightly less than analysts expected, allowing betting markets to believe the Federal Reserve will lower interest rates in September.
The CPI increased 0.2% from June and 2.7% compared to last year. Dow Jones analysts estimated it would come in at 0.2 and 2.8%, respectively, per CNBC. However, Core CPI, which excludes food and energy prices, showed more volatility. It grew 0.3% compared to June and 3.1% year over year.
This marks the largest monthly Core CPI gain since January and the highest annual level since February. Costs for services drove most of the increase, while goods inflation stayed tame, suggesting tariffs haven’t been a key factor in driving prices so far, the Wall Street Journal reported. Household goods prices increased 0.7% after a 1% jump in June, up 2.4% YoY. But apparel prices, which could have been hit hard by tariffs, only grew 0.1%. In another tariff-sensitive market, new car prices remained flat while used car prices increased 0.5%.
Businesses stockpiled goods earlier in the year to avoid passing on tariff costs to consumers for as long as possible, but this month’s data shows that strategy’s time might be running out.
The CPI report from the Bureau of Labor Statistics arrived after President Trump fired its head, Commissioner Erika McEntarfer, in early August after a weak jobs report and nominated E.J. Antoni from the Heritage foundation, a conservative think tank, to replace her.
And of course, just like many of Trump’s other nominees, Antoni has previously criticized the agency he now intends to run.
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