Topline
Consumer prices rose as expected in July, according to Federal data published Wednesday, as analysts projected an in-line inflation report would likely persuade the Federal Reserve not to raise interest rates next month.
Key Facts
Consumer prices rose 3.4% from July 2025 and 0.1% from June and July, the Bureau of Labor Statistics reported, matching Wall Street’s consensus estimates, according to FactSet.
Core CPI, the inflation measure that excludes the volatile energy and food sectors, dropped to 2.5% in July, meeting estimates.
Morgan Stanley Wealth Management chief economist strategist Ellen Zentner said in emailed comments Wednesday that an in-line report would keep the “no need to hike rates” narrative intact for the central bank ahead of another round of inflation data in August, “but unless those numbers tell a much different story, the Fed will likely still be in a position to leave rates unchanged next month.”
Charles Schwab analysts wrote Tuesday that an inflation report meeting expectations would likely reduce the odds of an interest rate hike in September, following a much weaker-than-expected jobs report last week.
Colin Martin, Schwab’s head of fixed income research, said in the note, “When the labor market is strong and inflation is high, it’s harder to defend not hiking rates.”
David Kelly, JPMorgan’s chief global strategist, wrote Monday the firm anticipates inflation falling steadily “in the months ahead, even if the pace of decline is frustratingly slow for policymakers and consumers.”
what to watch for
The Bureau of Economic Analysis will publish the latest personal consumption expenditures price index data—the Federal Reserve’s preferred inflation gauge—on Aug. 30. The previous PCE report indicated that inflation rose at its fastest rate in nearly three years in May, reaching its highest annual rate since October 2023.
big number
73.8%. Those are the odds of an interest rate hike at the Federal Open Market Committee’s December meeting, according to CME Group’s FedWatch tool. The probabilities are much lower in October and September at 56.2% and 42.1%, respectively.
key background
The Federal Reserve voted last month to hold interest rates at 3.5%-3.75%, but three officials dissented in favor of a quarter-point hike. Fed Chair Kevin Warsh has pointed to “persistently elevated inflation” and said the central bank has a “resolute commitment to restoring price stability” after inflation surged amid a Middle East conflict. Inflation briefly cooled in June during a brief peace deal between the U.S. and Iran, marking the largest month-to-month decline in consumer prices since April 2020. A back-and-forth between U.S. and Iranian officials on a new deal has prevented oil prices from remaining at a lower level, however, as steadily high energy prices continue to push consumer prices higher in the U.S.
further reading
Inflation Fell At Fastest Rate In Years In June As Gas Prices Eased
Fed Keeps Interest Rates Unchanged As Dissent Mounts
This article was originally published on Forbes.com
