The latest US inflation numbers are out, and markets are watching closely. Headline inflation stayed steady in July, but core prices, the ones that matter most to the Fed, are climbing.
That’s put a September interest rate cut firmly in focus, even as tariff-driven price pressures start to bite.
Here’s what you need to know.
The Consumer Price Index (CPI) rose 0.2% in July from the previous month, matching forecasts and easing from June’s 0.3%. Year-on-year, inflation came in at 2.7%, just under the expected 2.8% and the same as June.
The sharper move was in the core CPI, which strips out food and energy. It rose 0.3% in July and is now 3.1% higher than a year ago – the biggest jump in five months and above market expectations.
President Trump’s global tariffs are now pushing up costs for US companies, and more of those costs are being passed to shoppers. Businesses had been holding back earlier this year, waiting for clarity on trade policy. But with that picture clearer, many are raising prices.
Goldman Sachs says only 22% of tariff costs were passed to consumers at first, but that could climb to 67% by October as older, cheaper inventory runs out.
The CME FedWatch Tool shows traders see an 82% chance the Fed will cut rates by next month. Some expect more than two cuts before the year ends.
But the Fed has a dilemma.
Inflation is proving sticky while the labour market is showing signs of weakness. As Citi’s Stuart Kaiser puts it, “CPI could leave [the] Fed with dual headaches.”
Jefferies’ Mohit Kumar adds that while weak jobs data could force cuts, “a sticky inflation picture will prevent an aggressive easing policy.”
CPI tracks how quickly consumer prices are rising and it’s one of the most important economic indicators for global markets. For crypto traders, the stakes are simple:
The Producer Price Index (PPI) is due later this week, followed by the Fed’s Jackson Hole meeting at the end of August. Both could influence how aggressively the Fed moves in September.
For crypto traders, the path of U.S. interest rates will remain a key driver over the coming weeks. Watch this space for updates!
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