Inflation Research Brief

Inflation readings largely as expected. The Consumer Price Index (CPI) increased 3.4 percent year-over-year in July, while core CPI – which excludes food and energy costs – rose 2.5 percent. Both measures fell 0.1 percentage point from June. The readings matched market expectations and suggest inflationary pressures remain contained for now. Nevertheless, the impact of renewed hostilities in the Persian Gulf likely has yet to fully filter through supply chains and could put upward pressure on inflation in the near term. Even so, this report, together with July’s softer labor market data, should modestly ease immediate pressure on the Federal Reserve to raise interest rates. Policymakers will receive another round of inflation and employment data before the September meeting, so rate hike prospects remain uncertain.