Hooray: Inflation Cooled Off In July!

July's headline and core CPI inflation rates were lower than expected at 0.0% and 0.3% (table below). The y/y rates were down to 8.5% and 5.9% below recent peaks of 9.1% (in June) and 6.5% in March). That's consistent with our view that inflation is peaking, but remains too high. So we expect that the Fed will hike the federal funds rate again by 75bps in September and pause for the rest of this year.

Nevertheless, it was good news for stock and bond investors. The purchasing power of consumers during July certainly got a boost from the flat CPI.