Key facts
- US consumer prices are expected to have risen moderately in July.
- Boston Fed President Susan Collins is open to a September interest rate hike.
- Collins stated that economic conditions may require tighter policy.
- Inflation remains a primary concern for Fed officials.
- Geopolitical events in the Middle East are seen as a factor influencing inflation.
U.S. consumer prices are expected to have increased moderately in July, a development that could further reduce expectations for the Federal Reserve to raise interest rates this year. The Labor Department's Consumer Price Index report is anticipated to show a slight rebound after a decline in June.
Federal Reserve Bank of Chicago President Austan Goolsbee has emphasized that reducing inflation is the paramount priority for the U.S. economy, viewing it as the most significant challenge. Atlanta Fed interim President Cheryl Venable echoed concerns about high inflation and linked potential easing to geopolitical events in the Middle East. Boston Fed President Susan Collins stated she would be open to backing an interest rate increase as soon as September if the data dictated it, noting that poorer Americans are struggling to make ends meet.
Economists forecast that the CPI likely rebounded 0.1% in July, after falling 0.4% in June. Year-on-year, the CPI is projected to have increased 3.4% in July. Outside of volatile energy and food components, core CPI is expected to rise 0.2% in July, translating to a 2.5% year-on-year increase. Some economists believe that benign core CPI readings could still lead the Fed to tighten monetary policy in September, with core PCE inflation expected to rise 0.2% over the month.