US Consumer Prices (Jul. 2025)

There was another narrative shift for the Fed in the July CPI data, with tariff effects once again barely perceptible but a stronger gain in services prices pointing to another above-target gain in the core PCE deflator. Given several FOMC participants are now more worried about the labour market outlook, this probably won’t be enough to prevent the Fed from easing policy sooner than we previously expected. But it does support our view that markets are overestimating the loosening to come over the next 18 months.