A shopper browses fresh fruit at a grocery store in Wilmington, North Carolina, U.S., on Saturday, August 8, 2026. Allison Joyce | Bloomberg | Getty Images A key inflation reading on Wednesday showed prices moderated across a range of goods and services, possibly removing the urgency of an imminent interest rate hike. The consumer price index, part of the Federal Reserve’s inflation dashboard, showed a seasonally adjusted increase of 0.1% during July, according to the Bureau of Labor Statistics. Excluding food and energy, the so-called core CPI rose 0.2%. On an annual basis, the inflation rates were 3.4% and 2.5%. All readings were in line with Dow Jones consensus forecasts. Although levels remained well above the Federal Reserve’s 2% target, the moderate monthly readings, along with equally moderate levels in June, indicate that the energy-driven burst at the beginning of the year is subsiding, although prices remain volatile and subject to constant change. conditions in the Middle East. Stock market futures rose following the release, while Treasury yields were negative across the board. Traders further reduced the probability of a rate hike in September, reducing it to 42%, according to the CME Group’s FedWatch Futures Price Gauge. Energy prices fell another 1.5% during the month after a 5.7% decline in June. Still, the sector saw a 14.7% year-over-year increase following strong gains in previous months, including a 10.9% rise in March just after attacks on Iran began. Both food and housing saw increases of 0.1% in July. Housing costs had been persistent and a key factor in keeping the inflation rate above 2%. Even with the modest increase, housing accounted for about two-thirds of the overall increase, the BLS said. New vehicle prices rose 0.1%, while used cars and trucks rose 0.4%. Health care rose 0.4% and airfares accelerated 2.2%. The Federal Open Market Committee, the central bank’s rate-setting body, doesn’t meet again until September, so it will have an extra month of inflation data to digest before having to make a decision. “Inflation in line will keep intact the ‘no need to raise rates’ narrative that took hold after last week’s jobs report,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “There will be another round of inflation data before the September FOMC meeting, so the story could still change. But unless those numbers tell a very different story, the Fed will probably still be in a position to leave rates unchanged next month.” Until about a week ago, markets had been pricing in a strong likelihood of an increase at next month’s policy meeting. However, renewed concerns about the labor market following a net job loss in July combined with gyrations in the energy sector have taken away the immediacy of an increase. At the July meeting, the FOMC voted 9-3 to hold its key interest rate steady, with all dissenters expressing support for a rate hike. Markets are now pricing in a higher likelihood of a move in October or December. This is breaking news. Update to get updates. Choose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news.
