The very muted 0.1% m/m gains in both headline and core CPI in July will certainly give the Fed pause for thought in whether to raise interest rates or not at the next FOMC meeting in mid September. On balance, we still think the Fed will go ahead and raise rates in response to the cumulative improvement in labour market conditions. But the decision is finely balanced. With underlying price inflation and wage growth still muted, a case can also be made for waiting.
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