July CPI Report Boosts Rate-Cut Odds: What the Experts Say
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The July Consumer Price Index (CPI) data indicates a moderate impact from tariff-related inflation, fueling renewed expectations for a Federal Reserve rate cut in September.
Inflation Overview
Headline inflation rose 0.2% month-over-month, easing from June’s +0.3% and aligning with economists' forecasts.
On an annual basis, CPI held steady at 2.7%, slightly below the expected 2.8%.wsj.com+15kiplinger.com+15kiplinger.com+15
The core CPI (excluding food and energy) climbed 0.3% MoM and 3.1% YoY, marking its highest year-over-year reading since February.bitbo.io+2investopedia.com+2
Market Reaction & Fed Outlook
Financial markets reacted positively, with a rise in rate-cut expectations for September, now priced at around 90%, up from 86% the previous day.kiplinger.com+5kiplinger.com+5nypost.com+5
The Dow Jones and S&P 500 rose following the report, while Treasury yields and the dollar slipped.thetimes.co.uk
Experts Weigh In
Ellen Zentner (Morgan Stanley Wealth Management): Markets likely welcome the data, allowing the Fed to consider September rate cuts amid labor-market weakness.kiplinger.com+1
Analysts emphasize that tariff-related inflation remains moderate for now, but may intensify over time.kiplinger.commarketwatch.comreuters.com
Reuters highlighted the moderation in headline inflation yet noted tariffs continue to affect certain goods like furniture and apparel.reuters.com
The New York Fed reported rising long-term inflation expectations, with the five-year outlook reaching 2.9% — the highest since March. Fed officials remain watchful for signs that inflation pressures may become more persistent.reuters.com
Summary Table
| Indicator | Change / Value | Interpretation |
|---|---|---|
| Headline CPI (MoM) | +0.2% | Easing pressure |
| Headline CPI (YoY) | 2.7% | Slightly below expectations |
| Core CPI (MoM) | +0.3% | Highest monthly increase since Jan |
| Core CPI (YoY) | 3.1% | Highest since February |
| September rate-cut odds | ~90% | Significant increase |
| Long-term inflation | 2.9% (5-year expectation) | Elevated risk perception |
Author : Brian Leclere