Consumer prices in the US rose moderately in July, with import tariffs driving underlying inflation to its largest gain in six months. The CPI increased 0.2% last month and 2.7% year-on-year. Excluding food and energy, the core CPI rose 0.3% and 3.1% year-on-year. Market reactions were positive, with stocks rising and bond yields flat.

Economists predict the Fed may cut rates in September due to the inflation data. Inflation is approaching the Fed’s 2% target, increasing the likelihood of rate cuts. The economy’s stability, weaker job reports, and low inflation support potential rate cuts by the end of the year, depending on economic data.

Experts view the July CPI as meeting expectations and not showing significant tariff pass-through to consumer prices. This supports the likelihood of a September rate cut. Inflation remains subdued, giving policymakers flexibility amidst weakening labor markets. The Fed may consider a September cut at the Jackson Hole symposium.

Analysts believe inflation will rise in the future due to tariffs, but current data shows firms may be absorbing costs. Core inflation at 3.1% year-on-year supports a potential September rate cut. The Fed’s policy stance remains data-dependent, with inflation contained and a softening labor market influencing decisions.

The US dollar weakened as CPI data met expectations, suggesting slow inflation growth. Markets anticipate multiple interest rate reductions, but tariff-induced inflation may be gradual. Tariffs could impact consumer prices over time, complicating Fed decisions in the coming months.

Overall, the July CPI data aligns with expectations, supporting the potential for a September rate cut. Inflation remains a key factor for policymakers, with tariff impacts expected to be gradual. The Fed’s decision in September will depend on economic data and market conditions, including inflation expectations and employment trends.

Read more at Yahoo Finance: US inflation rises in July, in line with expectations