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Cooler core CPI supports case for Fed to hold rates in September
Core CPI rose 2.5% in July, down from 2.6% in June, and analysts said the trend keeps the rate hike narrative off the table unless upcoming data changes the outlook.
A cooler July inflation reading on a core basis is likely to strengthen expectations that the Federal Reserve can keep rates unchanged at its next policy decision in September, according to Yahoo Finance. Core CPI, excluding volatile food and energy, rose 2.5% last month, matching expectations and easing by 0.1 percentage point from June.
On a month over month basis, core CPI increased 0.2% in July, also in line with expectations. The report marked a second straight month of cooling, with core CPI at 2.5% after 2.6% in June.
RSM chief economist Joseph Brusuelas said the Fed uses core inflation to get a more reliable picture because energy and food prices can swing significantly. Morgan Stanley Wealth Management chief economic strategist Ellen Zentner said the in line inflation data preserves the view that there is no need to hike rates, though she cautioned that another round of inflation data comes before the September FOMC meeting.
The CPI update also arrived after a weaker job market report showing the economy lost 23,000 jobs in July. Yahoo Finance also noted re-escalating tensions in Iran are contributing to volatile energy prices, which could affect headline and core readings later in the year.