Inflation is expected to cool again in today's July CPI report

Bureau of Labor Statistics to Release July Consumer Price Index Report

The Bureau of Labor Statistics will publish the July consumer price index data at 8:30 a.m. Eastern Time. The report follows the June reading, in which the year-over-year inflation rate declined to 3.5 percent from a prior level, below the consensus expectation of 3.8 percent and the lowest figure recorded since March.

Market forecasts compiled ahead of the July release point to a further reduction to 3.4 percent. David Kelly, chief global strategist at J.P. Morgan Asset Management, stated that several elements have contributed to the recent moderation. These include higher rental vacancy rates that have limited rent increases, a tariff schedule less restrictive than the one in place a year earlier, and slower wage growth. Kelly added that the speed of any further decline will depend in part on the time required for traffic volumes through the Strait of Hormuz to return to normal levels.

One comparison tracked in the data is the relationship between the CPI and average hourly earnings. Wage growth measured 3.2 percent over the twelve months ending in July, the smallest annual increase since 2021. Nicole Bachaud, an economist at ZipRecruiter, observed that nominal wage gains have not fully offset price increases for many households, leaving reduced discretionary income at month-end for middle- and lower-income workers who rely on wage growth to maintain purchasing power.

Energy prices constitute another category under review. The energy price index rose 15.7 percent year over year in June, down from a 23.5 percent rate recorded in May. The change coincides with ongoing developments in the Iran war and associated movements in global oil markets.

The CPI release follows the employment report issued the previous Friday, which showed a net loss of jobs in July. Downward revisions to earlier months indicated roughly 100,000 fewer positions added than previously estimated. The unemployment rate rose, overall labor force participation fell, and the prime-age participation rate increased slightly.

Cory Stahle, senior economist at the Indeed Hiring Lab, noted that multiple indicators of subdued wage growth and hiring activity suggest employers face limited pressure to expand headcount aggressively. He stated that some firms appear to be directing compensation resources toward health benefits rather than base-pay increases.

One additional CPI report is scheduled before the Federal Open Market Committee convenes in mid-September to assess monetary policy settings. Interest-rate futures tracked by the CME FedWatch tool on Tuesday afternoon assigned approximately equal probabilities to a rate increase and to an unchanged target range.

The Bureau of Labor Statistics compiles the consumer price index from a monthly survey of prices for a fixed basket of goods and services. The index serves as the primary measure used by the Federal Reserve and other institutions to track changes in consumer costs. Components include shelter, food, energy, transportation, and medical care. Seasonal adjustments are applied to isolate underlying price movements from regular calendar effects.

Data users also examine core CPI, which excludes food and energy items because of their volatility. The June core reading contributed to the overall moderation observed last month. Analysts will compare the July core and headline figures against the June outcomes and against the forecasts issued by major banks and research firms.

The jobs report released on Friday included revisions that lowered the net job gain for May and June combined. The unemployment rate moved higher, while the labor force participation rate declined. Prime-age participation, covering workers between 25 and 54 years old, edged upward. These labor-market figures provide context for wage trends that appear in the CPI release.

The next CPI print will supply updated information on price pressures ahead of the September policy meeting. Market pricing reflected in fed-funds futures will continue to incorporate incoming data until that date. The Bureau of Labor Statistics has scheduled the August CPI report for release in mid-September, prior to the FOMC decision.