**U.S. Inflation Holds Steady in July, But Core Pressures Tick Higher**
The Consumer Price Index (CPI) rose 0.2% in July, in line with economists’ expectations and up from a 0.1% gain in June, according to the latest data from the Bureau of Labor Statistics. On a year-over-year basis, inflation held steady at 2.7%, unchanged from June.
Core CPI—which excludes the more volatile food and energy categories—increased 0.3% in July, accelerating from a 0.2% rise the previous month. This brought the core annual inflation rate to 3.1%, underscoring persistent underlying price pressures that continue to exceed the Federal Reserve’s 2% target.
One contributing factor to these pressures is the slower-than-expected pace at which tariff-related price increases are reaching consumers. According to Goldman Sachs, only 22% of tariff costs were passed on to consumers early in the process, as importers initially relied on pre-tariff inventories. That figure, however, is projected to climb to 67% by October, raising concerns that consumer prices could rise further in the months ahead—complicating the Fed’s inflation strategy.
Within the Federal Reserve, policymakers remain divided. Some, such as Christopher Waller and Michelle Bowman, have expressed heightened concern about signs of labor market softening. Others argue that inflation remains too high to justify immediate rate cuts. Given the prospect of higher consumer prices ahead, officials remain cautious, signaling a wait-and-see approach to future interest rate adjustments.
—Reporting by Connect CRE
