Report expected to show slight acceleration
The July Consumer Price Index, set for release Tuesday at 8:30 a.m. ET, is projected to reveal an annual inflation rate of 2.8%, edging up from June’s 2.7%, according to Bloomberg estimates. On a monthly basis, prices are forecast to rise 0.2%, slowing from June’s 0.3% increase due to lower gasoline prices and softer food inflation.
Core CPI, which excludes volatile food and energy costs, is expected to climb 3.0% year over year, up from 2.9% in June. Month over month, core prices are projected to increase 0.3%, the largest gain in six months, pointing to growing goods inflation despite earlier relief from services costs.
Tariff pressures begin to emerge
Recent data suggests import tariffs are starting to lift consumer prices. In June, apparel rose 0.4% and footwear jumped 0.7% after prior declines. Furniture and bedding prices also reversed course, gaining 0.4% following May’s drop. Wells Fargo economist Sarah House noted it is “still early in the price adjustment process” to determine how costs will be split between consumers, domestic retailers, and foreign exporters.
House added that “growing consumer fatigue” is making broad price hikes harder to sustain, even as inflation is likely to hover near 3% for both CPI and the Fed’s preferred PCE measure by year-end.
Fed policy outlook in focus
The inflation update arrives as the U.S. effective tariff rate sits near 18.6%, its highest since 1933, per Yale Budget Lab data. Despite the tariff-driven price pressures, markets anticipate the Federal Reserve will cut interest rates in September, citing labor market softness and recent data revisions.
Citi analyst Stuart Kaiser warned that “CPI could leave [the] Fed with dual headaches,” as goods inflation edges higher while policymakers debate the timing and size of rate cuts. The CME FedWatch Tool shows an 87% probability of a 0.25% rate cut next month, up sharply from 57% a month ago.
