July CPI Report Analysis

July's Consumer Price Index (CPI) Report released on Tuesday 8:30 AM showcasing the extent to which inflation and prices gapped up in July ahead of tariff pressures, steadily falling fuel prices, and international trade agreements.

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The Consumer Price Index (CPI) rose 0.2% in the month of July, right in line with expectations at around 0.2%. Meanwhile, the CPI YoY (Year over Year) rose slightly lower than estimates, 2.7% versus what was expected, 2.8%.

The index for shelter rose 0.2%, which the U.S. Bureau of Labor Statistics cited as the primary source of July's overall CPI increase. The overall food index was unchanged, meaning that it was commonplace for prices to have stayed the same throughout the market. Energy fell 1.1% in the month as gasoline fell 2.2% over the same period.

July CPI's results compared to previous months, U.S. Bureau of Labor Statistics.

This data is very strong for what investors expected. Instead of the economy suffering through tariff-related inflation pressures, the cost of goods is only mildly increasing, far better than what analysts believed to be a much larger increase in the price of goods. It shows that companies are still successfully not passing on the price to consumers, and all across the board consumers are not yet seeing a significant impact from tariffs.

However, while tariffs haven't had a major short-term impact on inflation, this data is connected in a series of consecutive CPIs still showing a slightly rising CPI and a firm inflation rate of 3.1%, which is still moderately high for our economy and signals that tariffs are contributing to long-term price growth.

In the advent of this results, it is even more clear for the Federal Reserve to pursue a September rate cut. According to Polymarket, current betting odds place a rate cut next month as an 81% chance of a 25 basis points reduction in interest rates. If so, investors should feel confident going into the stock market over the next few months, but the constant issue of tariff-induced inflation could still find ways of shaking up stocks if new data comes out.