The highly anticipated Consumer Price Index was released this morning with diverging year over year numbers. The CPI increased 0.2% on a seasonally adjusted basis in July, after rising 0.3% in June, the U.S. Bureau of Labor Statistics reported today. On a Year-over-Year basis, the headline number increased 2.7% before seasonal adjustment, which was below the expected 2.8% that was anticipated.

The core CPI for all items less food and energy rose 0.3% in July, which was in-line with expectations but was the second largest month over month increase this year. The core less food and energy index rose 3.1% on a year-over-year, which was just above the expected 3.0%. A 0.2% increase in shelter costs drove much of the rise in the index, while food prices were flat and energy fell 1.1%, the BLS said. The energy index decreased 1.6 % for the 12 months ending July. The food index increased 2.9% over the last year.

Tariff-sensitive new vehicle prices also were unchanged though used cars and trucks saw a 0.5% jump. Transportation and medical care services both posted 0.8% moves higher. Tariff effects were also seen in household furnishings and supplies showed a 0.7% increase after rising 1% in June. However, apparel prices were up just 0.1% and core commodity prices increased just 0.2%.

The report comes at both a critical time for the economy and the BLS itself, which has come under President Trump’s criticism for what he has charged is political bias against him. Trump fired the prior BLS commissioner after a surprisingly weak July nonfarm payrolls report earlier this month, and on Monday said he would nominate E.J. Antoni, a critic of the bureau, as the new chief.

What does this mean for markets moving forward?

Stocks have rallied post CPI results to session highs with the benchmark S&P 500 (SPX) and Nasdaq-100 (NDX) just below all-time highs. Yields are consolidating after rising prior to the CPI data and the Dollar Index ($DXY) is falling, which is also supporting stocks. Expectations for a September rate cut from the FOMC are also rising above 93% according to the CME Fedwatch tool from below 85% prior to the number.

The pathway for at least two cuts this year seems to be intact and perhaps Fed Chair Powell will give investors some clarity on this at the Jackson Hole Economic Symposium from August 21-23. Fed Chair Powell has been steadfast in his belief that tariffs would cause a rise in inflation, but so far the numbers have been relatively muted versus his expectations. Maybe a Powell pivot is due as that is what the market is expecting at this point.

Tune in live from 8 a.m. to 5 p.m. ET, or anytime, anywhere, on‑demand.

Or stream it via thinkorswim® and thinkorswim Mobile, available through our broker-dealer affiliate, Charles Schwab & Co., Inc

Please do not reply to this email. Replies are not delivered to Schwab Network. For inquiries or comments, please email [email protected].

See how your information is protected with our privacy statement. 

Charles Schwab and all third parties mentioned are separate and unaffiliated, and are not responsible for one another's policies, services or opinions. Schwab Network is brought to you by Charles Schwab Media Productions Company (“CSMPC”). CSMPC is a wholly owned subsidiary of The Charles Schwab Corporation and is not a financial advisor, registered investment advisor, broker-dealer, or futures commission merchant.