Here Are The Key Takeaways From The US CPI Report For July

(Bloomberg) -- Here are the key takeaways from the July US consumer price index report released Wednesday:

• The core CPI — which excludes food and energy costs — increased 3.2% in July from a year ago, still the slowest pace since early 2021. The monthly measure rose 0.2%, a slight pickup from June’s surprisingly low reading.
• Headline inflation climbed 0.2% from the prior month and 2.9% from a year ago. The Bureau of Labor Statistics said nearly 90% of the monthly advance was due to shelter costs, which accelerated from June.
• The data did little to change overall expectations on rate cuts by the Federal Reserve over coming months. Futures trading continues to show a full percentage point of cuts by year-end. For the September meeting, the odds of a 50-basis-point reduction are now less than 50% compared with a greater-than-even chance earlier this week.
• Housing costs were again the standout. The shelter index, which accounts for 90% of the monthly increase, rose 0.4% — in June it rose by 0.2%. The motor vehicle insurance index rose 1.2% in July following a 0.9% increase in June while the food basket rose 0.2% on-month. Energy, new vehicles, apparel and airfares were among sectors that saw declines on month.
• Markets took the data in their stride. Stock futures edged upward and Treasury yields rose. The 2s10s yield curve flattened — it was 2 basis points flatter on the day before the print and it has flattened a further 2 bps since.

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