publication
2025-08-12 14:30
July unexpectedly brought a strong increase in CPI base inflation in the United States. But at the same time, the wide indicator of consumer prices turned out to be slightly lower than expected. This puts in a serious position of Fed decision makers.
In July 2025, CPI inflation in the USA was 2.7% – the Government Office of Labor Statistics (BLS) informed. It was a reading lower than the market consensus, which assumed the increase in CPI inflation to 2.8%. However, the Fed's prognostic model from Cleveland ordered to expect a result of 2.72%. Relative to June, the price index of consumer goods increased by 0.2%. So as much as the analysts' forecasts were.
We would like to remind you that in June the CPI increase was shown by 2.7%rdr, in May by 2.4%, and on April by 2.3%. The April reading was the lowest since March 2021. All the time, however, these are readings exceeding the 2 % purpose of the federal reserve. This state of affairs has been going on for 53 months – that is from March 2021. In total, this gives over four years of crossing the Fedian purpose.
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However, it may turn out to be an even greater problem An unexpected increase in the so -called base inflation – i.e. the price indicator of consumer goods after turning off food, fuels and energy, which in addition also accelerated. The base CPI in July 2025 amounted to 3.1% of yards, exceeding the market consensus at 3.0%.
The annual dynamics of this indicator was the highest than February after in March, April and May the lowest readings were recorded in 4 years (2.8%). Analysts, however, expected it only up to 3%. The Fed of Cleveland forecasted an increase of 3.04% yard and an increase of 0.24% on a monthly basis.
Inflation inflation, and the Fed will cut interest rates anyway?
Despite the CPI inflation approaching 3%, the market expects that in September the federal reserve will return to the loosening of monetary policy. Even before the publication of the BLS report, the Termatic Market Square valued the chances of the 25-point reduction in federal funds at the September FOMC meeting-according to the Fedwatch Tool calculations. By the end of 2025, feet in Feda are to be reduced by 50-75 PB. At least, this is the result of traffic lights on the Federal Fund's foot.
On the other hand, looking at the monthly CPI growth in the last six months, the Fed has a free hand in loosening monetary policy. This is because the average monthly CPI dynamics in America after July decreased to 0.15% compared to 0.20% in June. For half a year, there has never been a growth of more than 0.3% MDM (with a fairly sensational drop by 0.1% MDM in March).
In July, the pressure on the increase in the CPI indicator was primarily exerted by rising prices of services. Apart from energy supply services, the increase in this category was 0.4% MDM and 3.6% yard. Although inflationary pressure in services has been present for over 4 years, its severity in conditions of deterioration of the condition of the labor market may be a considerable (and negative) surprise. Here BLS recorded in particular decisive increases in the categories “Transport Services” (by 0.8% MDM and 3.5% RDR) and “Medical Services” (by 0.8% MDM and 4.3% RDR).
However, cheap fuels had a lower inflation in July. Gasoline in the USA caught up by 2.2% MDM and was already 9.5% cheaper than last year. The diesel oil was 1.8% more expensive than in June, but still 2.9% cheaper than last year. In a monthly basis, gas and electricity prices also went down. In both categories, they were much higher (13.8% and 5.5%) higher rates than a year ago.
