U.S. Consumer Prices Rise in July

NEW YORK (Reuters) — U.S. consumer prices increased moderately in July, largely in line with expectations, though rising costs for goods due to import tariffs led to a significant increase in underlying inflation—the largest gain in six months.

The consumer price index (CPI) rose 0.2% in July after a 0.3% gain in June. Year-over-year, the CPI advanced 2.7%, unchanged from June. Economists surveyed by Reuters had anticipated a 0.2% increase and a 2.8% year-on-year rise.

Excluding the volatile food and energy sectors, the CPI climbed 0.3%, marking the biggest gain since January, up from a 0.2% increase in June. The core CPI increased 3.1% year-on-year in July, compared to 2.9% in June.

Market Reaction

Stocks:

U.S. stock index futures saw a rise following the CPI data, with S&P 500 E-minis slightly up.

Bonds:

The yield on benchmark U.S. 10-year notes remained flat at 4.277%.

Forex:

The dollar index slipped 0.1% to 98.406, while the euro gained 0.1% to $1.1622.

Comments

Tom Porcelli, Chief U.S. Economist, PGIM, New Jersey:
“This outcome is better than feared. Many will view this as a sign that the Fed might cut rates in September, although the effects of tariffs may take time to manifest fully.”

Adam Sarhan, Chief Executive, 50 Park Investments, New York:
“The decline in inflation is positive, increasing the odds the Fed will cut rates, especially with recent weaker jobs reports.”

Guy Lebas, Chief Fixed Income Strategist, Janney Montgomery Scott, Philadelphia:
“The July CPI aligns with expectations and indicates minimal tariff impact on consumer prices, solidifying the likelihood of a September rate cut.”

Seema Shah, Chief Global Strategist, Principal Asset Management, London:
“Though core inflation is at its highest since February, the CPI is not pressing enough to hinder a Fed rate cut in September. Tariff effects may grow in the coming months.”

Karl Schamotta, Chief Market Strategist, Corpay, Toronto:
“Underlying inflation remains subdued, granting policymakers flexibility to respond to labor market weaknesses. Rate cuts should be on the agenda for the September meeting.”

Alexandra Wilson-Elizondo, Global Co-CIO of Multi-Asset Solutions, Goldman Sachs Asset Management, New York:
“July’s CPI meets expectations, supporting the narrative for a September rate cut as inflation remains contained.”

Ben Laidler, Head of Equity Strategy, Bradesco BBI, London:
“While the market finds comfort in the headline number, core inflation may suggest the consensus for a rate cut is not as assured as it seems.”

Juan Perez, Director of Trading, Monex USA, Washington:
“The U.S. dollar’s decline reflects the CPI data meeting expectations. Markets are eager to predict more than one interest rate reduction this year.”

Brian Jacobsen, Chief Economist, Annex Wealth Management, Brookfield, Wisconsin:
“The message in core inflation hints that tariff-induced pressures will manifest gradually, complicating the Fed’s response in the foreseeable future.”