Annual inflation fell to 3.4% in July, matching expectations and reducing trader expectations for a September rate increase.
US consumer prices rose 0.1% in July, bringing the annual inflation rate to 3.4%, in line with forecasts. Core CPI, excluding food and energy, increased 0.2% monthly and 2.5% annually, reinforcing signs of moderating price pressures after two consecutive softer readings.
The shelter index, which accounts for a third of CPI, rose just 0.1% over the past two months, driven partly by declines in lodging away from home. However, owners’ equivalent rent remains a key watch area. Energy prices, down 7% from May’s peak, contributed to recent disinflation but face upside risks from a 10% rise in crude oil over the past week.
Markets reacted by trimming odds of a September Fed rate hike, though inflation remains above the central bank’s 2% target.