Catenaa, Tuesday, August 12, 2025- US inflation rose less than expected in July, paving the way for the market expectation of a Federal Reserve rate cut in September.
The Consumer Price Index(CPI), on a headline basis, rose less than expected by 2.7%, a tenth lower than expectations for a rise of 2.8%.
Meanwhile, markets are pricing in a 92% chance that the Fed cuts rates by 25 basis points in September.
CPI for July showed prices, excluding volatile food and energy prices, rose 3.1% year over year.
That was hotter than the 3% economists expected and up from 2.9% in June, when inflation was pushed higher by rising goods prices. Month-over-month CPI clocked in as expected, rising 0.3%.
The Fed has been largely in a “wait and see” mode to cut rates, as many central bankers want to assess the impact of tariffs on inflation.
Fed Chair Powell has said he wants to see the impact of tariffs on inflation over June, July, and August, though he’s coming around to the idea that their impact may be no more than a one-time increase in prices.
Inflation now stands more than a full percentage point above the Fed’s 2% target.
Meanwhile, the S&P 500 recorded an all-time high on Tuesday, reaching 6,434 by 12:30 in the afternoon, on the hopes of a rate cut in September.
In the wake of the inflation numbers, President Trump again called on Fed Chair Jerome Powell to lower interest rates now, saying on social media that consumers aren’t paying tariffs and that it’s mostly companies and foreign governments.
“Jerome “Too Late” Powell must NOW lower the rate,” Trump posted on Truth Social. “The damage he has done by always being Too Late is incalculable. Fortunately, the economy is sooo good that we’ve blown through Powell and the complacent Board.”
