Part 2/6:
The consumer price index (CPI) for July surprised no one by aligning with analysts' forecasts, easing fears of unexpectedly high inflation. This in-line data has led to a reassessment of future Federal Reserve policy, with markets now assigning a roughly 90% probability that interest rate cuts will be announced in September. Such expectations are crucial, as they influence investor sentiment and bond yields.
However, beneath the surface, some underlying trends remain concerning. The core inflation rate, which excludes volatile food and energy prices, saw its sharpest increase in six months — rising to 3.1%. While still within expected bounds, this uptick indicates that inflationary pressures are not receding as promptly as hoped and may complicate the Fed’s approach moving forward.