US inflation eases in July, softening odds of a September rate hike

Annual consumer inflation in the United States slowed to 3.4 percent in July from 3.5 percent in June, the latest figures from the Bureau of Labor Statistics show, while consumer prices rose 0.1 percent on the month.

The easing was driven largely by a moderation in energy costs. Gasoline prices were up 24.6 percent year‑on‑year in July, down from a 26.7 percent rise in June, and the annual increase for heating oil slowed from 42.9 percent to 39.1 percent. On a monthly basis, fuel prices fell 2.9 percent in July compared with June.

Food prices increased by 0.1 percent month‑on‑month, in line with movements in housing costs. Core inflation, which excludes food and energy, stood at 2.5 percent year‑on‑year in July and rose 0.2 percent compared with the previous month.

Financial markets reacted positively to the report: futures on major U.S. stock indices climbed after the release and yields on U.S. Treasury bonds fell. The softer pace of consumer prices reduced the odds that the Federal Reserve will opt for another rate increase in September.

Market estimates quoted in the report put the likelihood of a September rate rise at 42 percent. Nevertheless, inflation remains above the Fed’s preferred level, leaving upcoming economic data as a decisive factor for policymakers.

Commentators have also noted that "Almost no one is buying a new home in the US."

Photo: press material from the event