Inflation in the U.S. for July largely met expectations, reinforcing the likelihood of the Federal Reserve initiating a rate cut at its upcoming meeting in mid-September.
According to the latest government report released Wednesday morning, the Consumer Price Index (CPI) increased by 0.2% in July, following a 0.1% decrease in June, and matching the forecasted 0.2%. On a year-over-year basis, the CPI rose by 2.9%, slightly below the expected 3% and unchanged from June’s 3%.
The core CPI, which excludes volatile food and energy prices, also increased by 0.2% in July, consistent with expectations and up from 0.1% in June. Annually, the core CPI climbed by 3.2%, aligning with predictions and showing a slight decline from June’s 3.3%.
In response to the inflation data, the price of bitcoin (BTC) showed a modest increase, trading at $61,200.
Before the release of this data, market speculation about whether the Federal Reserve would lower its benchmark federal funds rate at the September meeting had intensified. The CME FedWatch tool, which tracks the probability of rate moves based on market activity, showed a 52.5% chance of a 50 basis point cut and a 47.5% chance of a 25 basis point reduction. There was no expectation that the rate would remain at the current 5.25%-5.50% range.
This latest inflation report is unlikely to alter those expectations significantly. The focus will now shift to tomorrow’s initial jobless claims and retail sales reports, as well as the Fed’s Jackson Hole symposium at the end of August, where significant policy announcements have been made in the past.
