Inflation Not Spiraling Out of Control! U.S. July CPI Rises Just 0.1% MoM, U.S. Stock Index Futures Gain

The U.S. Bureau of Labor Statistics (BLS) reported on Wednesday (the 12th) that the July Consumer Price Index (CPI) increased by 0.1% month-over-month, in line with expectations from the Dow Jones survey. Core CPI, which excludes the more volatile food and energy prices, rose 0.2% month-over-month, also matching market forecasts.

On a year-over-year basis, overall CPI in July rose 3.4%, while core CPI increased 2.5%, both figures aligning with Wall Street expectations. Although the overall inflation rate remains significantly above the Federal Reserve's (Fed) 2% target, the modest price increase in July—following similarly stable data in June—suggests that the inflation surge earlier this year, driven by energy prices, is now cooling down.

The data also indicate that price increases are moderating across multiple categories of goods and services, potentially reducing the urgency for the Federal Reserve (Fed) to raise interest rates in the near term. Markets had previously feared that rising energy costs could reignite inflation, but two consecutive months of mild readings may now give policymakers more time to assess price pressures and economic activity before deciding on the next policy move.

However, since overall inflation remains above 3%, still a distance from the 2% target, whether the Fed can continue to hold steady will depend on upcoming data on prices, employment, and consumer spending.

Following the data release, the U.S. Dollar Index rose briefly by about 10 points, currently trading at 99.85. Spot gold prices initially dropped around $30, then rebounded over $20, now at $4,412.38 per ounce. U.S. stock index futures dipped slightly before quickly turning higher, with Nasdaq 100 futures gaining as much as 0.9%. The yield on the U.S. 10-year Treasury note initially rose, then swiftly declined, currently at 4.659%.

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