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July CPI seen firmer, with core expected to rise 0.2% monthly

Expectations point to core CPI rising 0.2% month over month, while headline CPI is forecast up 0.1% after June softness.

Reported · Written up by our desk · Major Pairs

The US Bureau of Labor Statistics will publish July Consumer Price Index data on Wednesday, with forecasts calling for smaller month over month increases in both headline and core inflation after June’s pullback.

The CPI monthly reading is expected to rise 0.1% after a 0.4% decrease in June, while the annual rate is seen retreating to 3.4% from 3.5% previously. Core CPI, which excludes volatile food and energy, is forecast to increase 0.2% month over month and 2.5% year over year.

One driver of the June softness was a sharp drop in crude oil, which fell roughly 20% in June after nearly a 16% drop in May, returning to around pre-war levels. FXStreet also notes the move came after news that the US and Iran reached a ceasefire on June 17 to begin negotiations.

TD Securities expects July inflation to show a modest increase versus June’s temporary weakness, projecting core CPI to rebound by 0.20% month over month as services inflation reaccelerates, led by items such as rents or owner equivalent rent, airfares, medical, and recreation. The bank also flags upside risks around the release, noting headline CPI is expected to rise 0.15% month over month with lower gasoline offsetting faster grocery prices, and that core goods could post their first increase in three months.

Latest closeWTI crude $83.42 ▲1.6%|Gasoline (RBOB) $2.892 ▼7.8%

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