U.S. inflation showed a slight increase in July, according to data released on Thursday. However, a key measure of core consumer prices revealed a slowdown in annual growth, indicating that the Federal Reserve’s series of interest rate hikes is impacting domestic inflation pressures.
The Bureau of Labor Statistics reported that the consumer price index for July rose by an estimated 3.2% compared to the previous year, slightly faster than the pace recorded in June. This figure fell just below the consensus forecast of a 3.3% advance, as annual inflation reached a four-decade high of 9.1% in June of the previous year. On a monthly basis, July’s inflation was up 0.2%, similar to the reading in June.
Core inflation, which excludes the volatile components of food and energy prices, also increased by 0.2% on a monthly basis and 4.7% over the year. While this annualized figure was slightly below the Wall Street forecast of 4.8%, it indicates that core inflation remains a significant factor to consider in the overall inflationary picture.
As a result of this data release, U.S. stocks experienced a modest decline, and Treasury note yields also decreased. The Fed’s ongoing efforts to combat inflation through interest rate hikes may still continue in the coming months, as future rate increases are not entirely ruled out. The CME Group’s FedWatch currently estimates a low probability of a rate hike in the next meeting, but the odds may rise as November approaches.
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