US: Inflationary Pressures Remain Subdued in July    - Forex | PriceONN
The Consumer Price Index (CPI) rose by 0.1% month-on-month (m/m) in July – in line with expectations. On a twelve-month basis, CPI edged down to 3.4% (from 3.5% in June). Energy costs fell by 1.5% m/m, led by a 2.9% m/m decline in prices at the pump. Food prices rose 0.1% m/m – its softest […] The post US: Inflationary Pressures Remain Subdued in July    appeared first on ActionForex.

July CPI Data Signals Easing Price Pressures

The latest figures from the United States show that inflationary forces are continuing to moderate. In July, the Consumer Price Index (CPI) registered a modest 0.1% rise compared to the previous month, a figure that precisely met market expectations. Looking at the year-over-year trend, the overall CPI measure saw a slight decrease, settling at 3.4%, down from 3.5% recorded in June.

Digging deeper into the components, energy prices experienced a notable contraction, falling by 1.5% month-over-month. This decline was primarily driven by a significant 2.9% drop in gasoline prices. Food costs, meanwhile, saw a minimal increase of 0.1% for the month, representing the slowest gain in three months. Annually, food prices are up 3.0%.

The crucial core inflation metric, which strips out volatile food and energy components, also demonstrated cooling. Core prices advanced by 0.2% from the prior month, a result that met consensus estimates. On an annual basis, this core price growth receded to 2.5%, bringing it back to the pace observed before geopolitical tensions escalated earlier in the year.

Core Services and Goods Show Subtle Shifts

Within the core inflation basket, services excluding housing costs posted a 0.2% increase month-over-month. This followed a flat reading in the preceding month. This rebound was partly fueled by firmer primary shelter costs, which rose 0.3% for the month, and a recovery in non-housing related services, which gained 0.2% after a 0.4% decrease in June.

Several categories contributed to the uptick in non-housing services. Medical care saw a 0.6% increase, education and communication services climbed 0.5%, and airfares jumped 2.2%. These figures suggest a complex interplay of factors influencing service sector pricing.

Core goods prices also contributed to the overall picture, rising 0.2% month-over-month. This uptick follows modest decreases seen in the two prior months. Significant gains were observed in education and communication goods, up 1.3%-potentially reflecting price adjustments from major tech firms on devices like computers and tablets. Recreation goods increased by 0.6%, and prices for used vehicles edged up by 0.4%.

Reading Between the Lines

While the monthly figures show some acceleration, the overarching inflation trajectory remains positive. The headline CPI’s move to 3.4% takes it further away from its recent peak, and the annual core inflation rate has returned to a level not seen in months. These data points provide policymakers with increased confidence that inflationary pressures stemming from supply chain disruptions and energy costs are subsiding.

Market reaction to the report was relatively muted. Federal Reserve fund futures indicated little change, with the probability of a September rate hike remaining around 40%. Attention now shifts to upcoming employment and CPI reports, alongside anticipated remarks from Federal Reserve Chair Warsh at Jackson Hole on August 28. These events will be critical in shaping the central bank's future policy decisions. For the immediate term, however, policymakers appear inclined to maintain their current stance.

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