U.S. CPI data shows stable inflation and lower costs for groceries and gas; September interest rate cut likely

President Donald Trump’s White House Press Secretary Karoline Leavitt
Today’s U.S. Consumer Price Index (CPI) report shows inflation holding steady at 2.7% in July, defying predictions of sharp tariff-driven spikes and signaling economic stability under President Trump’s leadership. With gas prices down 2.2% and grocery costs slightly lower, as White House Press Secretary Karoline Leavitt said during her press conference today, the data underscores the success of Trump’s “America First” agenda, highlighting rising real wages and small business optimism.
Rita Nazareth for Bloomberg News:
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Calm prevailed across Wall Street as an in-line inflation reading bolstered speculation the Federal Reserve will have room to cut rates in September, driving stocks higher and short-dated bond yields lower.
The S&P 500 topped 6,400, hitting a fresh record. The Russell 2000 index of small firms climbed 2%. While an initial rally in Treasuries faded, money markets priced in an about 90% chance of a Fed reduction next month. Two-year yields, which are more sensitive to imminent policy moves, dropped four basis points to 3.73%. A dollar gauge slid 0.5%.
The core consumer price index rose 0.3% from June. That was in line with forecasts. On an annual basis, it picked up to 3.1%.
The CPI data gave ammunition to those betting the Fed has cover to resume cutting as soon as next month, while easing some concerns that new tariffs might stoke lasting price pressures.
In a social media post on Tuesday, Trump resumed his criticism of Fed Chair Jerome Powell over the central bank’s decision to hold interest rates steady.

Nazareth continues:
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“Inflation remains under control for the moment, which means the risks are tilting toward the Fed’s full employment mandate,” said Jason Pride at Glenmede. “The stars appear to be aligning for a September rate cut.”
To Skyler Weinand at Regan Capital, Tuesday’s CPI data was tame enough that it gives the Fed the green light to cut rates by at least 25 basis points in September and opens the possibility of a larger 50 basis point cut in September.

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MacDailyNews Take: Probability of the too-late-to-raise, too-late-to-cut Fed no longer being able to ignore reality and therefore cutting rates by at least 25 basis points next month is high. A larger 50 basis point cut in September seems unlikely.
On interest rates, Powell was way late to hike, then didn’t go nearly high enough, and then started cutting too early. Three strikes and you ought to be out. – MacDailyNews, November 15, 2024
Now Powell is too late to cut. Four strikes and counting.
Receipts:
In July 2023, the Fed stopped raising rates too soon. – MacDailyNews, July 2, 2024
A premature rate cut by the Fed is of higher probability in an election year. – MacDailyNews, April 2, 2024
As we wrote in February 2023, “When certain quarters, including the Fed, delude themselves and others that ‘inflation is transitory’ and waste at least a year before doing a mere portion of what is necessary* (interest rate hikes), the price will be paid for being delusional and late.”
‘Tis best to get a handle on inflation, if you know how, while you still can. – MacDailyNews, May 11, 2021
Stop the misguided crusade against domestic energy production and profligate federal spending and inflation will be stopped dead in its tracks. It’s not difficult. – MacDailyNews, May 11, 2022
For new generations, sometimes tough lessons have to be retaught and learned the hard way. As we go through this, remember: It’s always darkest before the dawn. – MacDailyNews, July 14, 2022
Inflation is repudiation. — Calvin Coolidge
When a business or an individual spends more than it makes, it goes bankrupt. When government does it, it sends you the bill… [which] comes in two ways: higher taxes and inflation. Make no mistake about it, inflation is a tax and not by accident. — Ronald Reagan

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