Inflation Cooled Slightly at 2.7% in July, Fueling Rate-Cut Optimism

Key Numbers (Year-over-Year):

• Headline CPI: 2.7% for the 12 months ending July—unchanged from June, but below the 2.8% economists had expected. AP NewsThe GuardianInvestors.com

• Core CPI (excluding food and energy): Rose to 3.1%, up from June’s 2.9%, signaling underlying price pressures. The GuardianNew York PostInvestors.com

Market Response:Wall Street reacted positively to the softer-than-expected headline inflation. U.S. equity markets gained—S&P 500 rose ~0.6%, Dow Jones climbed ~1%, and Nasdaq added ~0.5%—all nearing record highs. The probability of a Federal Reserve interest rate cut in September surged to about 94%. AP NewsInvestors.com

Key Drivers & Broader Context:

• The headline CPI’s moderation was driven in part by falling energy prices.

• However, rising core inflation—especially in services—suggests tariff-related costs may finally be filtering through to consumers. New York PostThe TimesThe Guardian

• The report came shortly after the firing of the BLS chief, raising some political eyebrows, though the data appears intact. New York PostWall Street Journal

Summary Takeaways

• Headline inflation at 2.7% provides some relief.

• But rising core inflation to 3.1% underscores persistent domestic price pressure.

• Markets are upbeat, eyeing a likely Fed rate cut in September.

• Still, the upward trajectory in core costs adds uncertainty to the path ahead.

Let me know if you'd like a deeper dive into sector breakdowns, historical comparisons, or how this affects your personal finance outlook!

Sources

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