A widely followed measure of inflation accelerated slightly less than expected in July on an annual basis as President Donald Trump’s tariffs showed mostly modest impacts and investors grew more confidence about interest rate cuts ahead. The consumer price index increased a seasonally adjusted 0.2% for the month and 2.7% on a 12-month basis, the Bureau of Labor Statistics reported Tuesday. That compared with the respective Dow Jones estimates for 0.2% and 2.8%. Excluding food and energy, the core CPI increased 0.3% for the month and 3.1% from a year ago, compared with the forecasts for 0.3% and 3%. Federal Reserve officials generally consider core inflation to be a better reading for longer-term trends. The monthly core rate was the biggest increase since January while the annual rate was the highest since February.
A 0.2% increase in shelter costs drove much of the rise in the index, while food prices were flat and energy fell 1.1%, the BLS said. Tariff-sensitive new vehicle prices also were unchanged though used cars and trucks saw a 0.5% jump. Transportation and medical care services both posted 0.8% moves higher. Stock market averages posted strong gains after the report though Treasury yields were mixed. Traders ramped up bets that the Federal Reserve would start reducing rates again in September. Tariffs did appear to show up in several categories. For instance, household furnishings and supplies showed a 0.7% increase after rising 1% in June. However, apparel prices were up just 0.1% and core commodity prices increased just 0.2%. Canned fruits and vegetables, which generally are imported and also sensitive to tariffs, were flat. “The tariffs are in the numbers, but they’re certainly not jumping out hair on fire at this point,” former White House economist Jared Bernstein said on CNBC. Bernstein served under former President Joe Biden.
Source: CNBC
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