The US consumer price index (CPI) rose 0.2% in July and 2.7% over the year, slightly below forecasts of 2.8%, according to the Bureau of Labor Statistics. Core CPI, excluding food and energy, increased 0.3% for the month, the largest rise since January, and 3.1% annually, in line with expectations.
Shelter costs accounted for much of the increase, while food prices were flat and energy fell 1.1%. Tariff impacts were mixed, with household furnishings up 0.7% but apparel barely changed. Used vehicle prices rose 0.5%, and transportation and medical care services each gained 0.8%.
Markets rallied on the data, with traders increasing bets on a Federal Reserve rate cut in September and seeing a 67% chance of another cut in October. The Fed’s preferred inflation gauge, the PCE price index, will also factor into its decision.
President Donald Trump’s tariffs showed modest effects so far. Economists remain divided over whether they will cause only a one-off bump or a more sustained rise in prices. The BLS, under political scrutiny after Trump fired its commissioner earlier this month, faces budget cuts and reduced data collection.
Inflation-adjusted average hourly earnings rose 0.1% in July, leaving annual growth at 1.2%.
