U.S. July CPI Inflation Rate Falls for Four Consecutive Months, Core CPI Hits a Three-Year Low, Reinforcing Market Expectations for a Fed Rate Cut in September

U.S. Jul. CPI (MoM): 0.2%, [Est. 0.2%, Prev. -0.1%]
U.S. Jul. CPI (YoY): 2.9%, [Est. 3.0%, Prev. 3.0%]
U.S. Jul. Core CPI (MoM): 0.2%, [Est. 0.2%, Prev.0.1%]
U.S. Jul. Core CPI (YoY): 3.2%, [Est. 3.2%, Prev. 3.3%]

The July CPI data showed a continued decline in inflation for the fourth month in a row, with core CPI hitting its lowest level in over three years, solidifying expectations for a Fed rate cut in September. However, since the CPI data largely met expectations and housing inflation increased, traders have reduced their bets on a substantial 50-basis-point rate cut in September.

Wall Street analysts believe that the July CPI data might further set the stage for a 25-basis-point rate cut by the Fed in September. The Fed will next focus on the labor market; if job conditions are weak, a larger 50-basis-point cut might be necessary. While housing inflation is heating up, it does not hinder the overall trend toward rate cuts. Traders are now betting on a 25-basis-point cut in September.