U.S. consumer prices increased as anticipated in July, maintaining a trend of moderating inflation that aligns with expectations for a Federal Reserve interest rate cut in September. The Consumer Price Index rose 0.2% last month, rebounding from a 0.1% decline in June, according to the Bureau of Labor Statistics.

On an annual basis, the CPI increased 2.9% through July, slightly lower than the 3.0% advance recorded in June. This continued moderation in inflation from its peak of 9.1% in June 2022 suggests that higher borrowing costs are effectively cooling demand.

The core CPI, which excludes volatile food and energy components, also rose 0.2% in July, following a 0.1% increase in June. The year-over-year core CPI advanced 3.2%, marking the smallest annual increase since April 2021.

While inflation remains above the Fed’s 2% target, the consistent downward trend is fueling expectations of a rate cut at the central bank’s September meeting. Market sentiment is divided between a 25 and 50 basis point reduction.

The Fed has maintained its benchmark overnight interest rate at 5.25%-5.50% for a year, following 525 basis points of increases in 2022 and 2023. As the labor market shows signs of softening, with unemployment rising to 4.3% in July, pressure is mounting for the Fed to ease its monetary policy stance.

Information for this story was found via the Bureau of Labour Statistics and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.