In July, U.S. consumer prices on an annualized basis increased by less than anticipated, increasing the chances of the Federal Reserve starting to cut interest rates at its meeting in Sept.
According to the Labor Department’s data, the consumer price index in July rose by 2.9%, decelerating slightly from June’s 3.0%. Economists had expected that the figure would be the same as June’s rate.
The reading rose to 0.2% month-on-month after dropping 0.1% in June, as expected.
Capital Economic analysts said in a note the details of the CPI report were, however, disappointing, with OER up 0.4% and rent increasing by a bigger 0.5% m/m. After June’s more modest gains and the slowdown in the all-tenant rent index gauge of housing inflation, they had expected the weaker gains in June to become the new norm.
Excluding more volatile items such as food and fuel, the core number rose by 3.2% in the year to July, lower than expectations of 3.3%. Underlying price growth on a monthly basis edged up to 0.2%, after in June rising 0.1%.
Wells Fargo analysts said core goods prices dropped more than they had anticipated, led by another big (-2.3%) drop in used vehicle prices. Core services inflation was slightly higher than expected.
