US July CPI Increase Rate 3.2%... Below Market Expectations (Update)

The July Consumer Price Index (CPI), which can gauge the level of inflation in the United States, rose by 3.2% compared to the previous month, falling short of market expectations. As inflation shows a moderate upward trend, there is growing speculation that the U.S. economy will achieve a soft landing.

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The U.S. Department of Labor announced on the 10th (local time) that the July CPI increased by 3.2% compared to the same month last year. Compared to the previous month (3.0%), prices rose slightly by 0.2%, but this was below Wall Street's forecast (3.3%). Bloomberg reported, "For the first time in over two years, the month-over-month increase was the smallest for two consecutive months."

The rise in housing costs is analyzed to have influenced the CPI increase. On the other hand, used car prices have declined for the second consecutive month.

The core CPI, which excludes the volatile food and energy prices, also recorded an increase. The core CPI rose 4.7% year-over-year and 0.2% month-over-month. However, this was slightly below market expectations (4.8%). The core CPI peaked at 6.6% in September last year and has since fluctuated slightly up and down, showing an overall downward trend.

With both the CPI and core CPI falling short of market expectations, hopes are rising that the U.S. economy will achieve a soft landing. Bloomberg stated, "With the U.S. CPI rising moderately for two consecutive months, there is growing hope that the Federal Reserve (Fed) can control inflation without triggering a recession."

Accordingly, there is strong speculation that the Fed will maintain interest rates at their current level for the remainder of this year. There are three remaining scheduled Federal Open Market Committee (FOMC) meetings this year, in September, November, and December.

Anna Wing, an economist at Bloomberg, said, "The July core CPI rose at a pace consistent with the Fed's inflation target of 2%, and the Fed is expected to keep interest rates steady through the end of this year."

Previously, the Federal Reserve left open both the possibility of raising or holding interest rates steady at last month's monetary policy meeting. Since key economic data releases remain before next month's regular meeting, the Fed plans to make decisions based on the data. However, it has ruled out the possibility of cutting rates within this year.