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US CPI cools in July as core inflation slips to 2.5%

Shelter rose 0.1% month over month, while energy prices fell 1.5% month over month, supporting the case for the Fed to stay on hold.

Reported · Written up by our desk · Inflation

US inflation eased in July, with headline CPI rising 0.1% month over month and slowing to 3.4% year over year, according to Action Forex. Core CPI increased 0.2% month over month and cooled to 2.5% year over year.

Action Forex said all four CPI readings matched market expectations, reinforcing a gradual disinflation trend rather than a new policy surprise for the Federal Reserve. The outlet noted shelter rose 0.1% month over month, accounting for roughly two thirds of the monthly headline increase, while food also gained 0.1%.

Energy prices declined 1.5% month over month but remained up 14.7% year over year, Action Forex reported. Core inflation has now returned to 2.5%, matching levels seen in January and February after peaking at 2.9% in May.

For the Fed, the July data strengthens a wait and see approach, with weak payrolls already raising the hurdle for further tightening, Action Forex added. The focus for the next steps shifts to August employment and inflation readings, while it cautioned that a recent rise in oil could make the July energy effect temporary.

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