• All items CPI rose 0.2% on month-over-month basis in July with the year-over-year rate holding steady at 2.9%
  • Energy prices dipped slightly lower from June but were still up 12% from a year ago — little changed from the annual increase in June.
  • Year-over-year food price growth held steady at 1.4%.
  • Core (ex-food & energy) prices rose 0.2% on a month-over-month basis. That was enough to push the year-over-year rate up to a new cycle high of 2.4% in July.

Our Take:

U.S. CPI growth continued to firm in July. The headline year-over-year rate held steady at 2.9% — and is still being boosted by higher energy prices which were still up 12% from a year ago despite a monthly dip. Growth in the core (ex-food & energy) measure ticked modestly higher on a year-over-year basis for a third straight month, inching up to a new post-recession high at 2.4%. Shelter price growth bounced back as expected to a 0.3% month-over-month rate after a 0.1% increase in June. A 2.7% monthly jump in airline fares could be related to higher energy prices although prices were still below year-ago levels in July.

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To be sure, there is still little evidence that inflation is at risk of coming seriously unhinged on the upside in the near-term. The firming at rates slightly above the Fed’s stated 2% inflation objective, though, coupled with strong labour market and GDP data should only reinforce expectations that policymakers will continue to push interest rates gradually higher.


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