US inflation posts moderate increase in July

US consumer prices rose modestly in July, with the CPI up 0.2% from the prior month, easing from June’s 0.3% gain, while the annual inflation rate held steady at 2.7%.

Core CPI, which excludes food and energy, climbed 0.3% in July after a 0.2% rise in June. On an annual basis, core inflation accelerated to 3.1% from 2.9%, the largest increase in six months, driven mainly by higher goods costs linked to import tariffs.

Ahead of the July inflation release, markets widely expected the Federal Reserve to resume rate cuts in September, following five consecutive meetings of holding its benchmark rate at 4.25%–4.50% since December.

Bets on a September cut have been fueled by weak July employment figures and sharp downward revisions to May and June nonfarm payrolls.

However, the stronger-than-expected core inflation reading may complicate the Fed’s path, even as concerns grow over data quality. Budget and staffing cuts have halted the collection of certain CPI components in some US regions, casting uncertainty over the reliability of recent reports.