Investors are anticipating a September Federal Reserve interest rate cut after mild inflation last month. July’s inflation numbers were as expected, strengthening bets on a rate cut in September. Rates futures traders increased bets on a 25 basis point cut, with a 98% probability. Two-year Treasury yields declined after the data release.

The consumer price index rose 0.2% last month, in line with expectations, and 2.7% year on year. Trump used the numbers to claim tariffs do not hit consumers. Excluding food and energy, CPI rose 0.3%, the biggest gain since January. Core CPI increased to 3.1% year-on-year in July.

Joseph Lavorgna said exporters are absorbing tariffs by cutting prices. The CPI figures have disappointed for six months, indicating little inflation. Excluding volatile components, CPI rose 0.3%, the biggest gain since January. Tiffany Wilding expects core CPI to peak at 3.4% by year-end.

The Fed will consider August inflation and labor data before its next rate-setting meeting. Trump nominated E.J. Antoni as the new BLS commissioner after firing the previous leader for a weak job market scorecard. Antoni has criticized BLS for the eroding quality of its data.

Read more at Yahoo Finance: Investors double down on September Fed cut after CPI