U.S. Consumer Prices Expected to Edge Higher in July as Gasoline Prices Fall
Economists forecast a modest 0.1% rise in July's CPI, driven by lower gasoline costs, while core inflation is projected to stay above the Federal Reserve's 2% target.
The Labor Department is expected to report that U.S. consumer prices rose modestly in July, a move that may further ease market expectations for additional Federal Reserve rate hikes this year. Economists anticipate a 0.1% month-over-month increase in the Consumer Price Index (CPI) after a 0.4% decline in June, marking the first monthly drop in six years. Year-over-year CPI growth is projected at 3.4%, slightly below June's 3.5% gain.
The modest rise is largely attributed to a continued decline in gasoline prices, which averaged $4.064 per gallon in July versus $4.184 in June, according to Energy Information Administration data. Food prices are expected to inch up marginally, while goods such as furniture and apparel are forecast to contribute to the overall increase.
Excluding volatile energy and food items, the CPI is predicted to climb 0.2% in July, translating to a 2.5% year-over-year rise in core CPI inflation. Core inflation remains above the Federal Reserve's 2% target, prompting some analysts to argue that the data could still support a September rate hike. "A report in line with our expectations would strengthen the case for the Fed hiking in September," said Stephen Juneau, an economist at Bank of America Securities.
MetLife Investment Management economist Tani Fukui noted that while the numbers represent an improvement, they remain high relative to consumer wage growth. The outlook for core personal consumption expenditures (PCE) inflation also suggests continued pressure, with a 0.2% monthly increase expected, matching June's year-over-year rise of 3.3%.