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United States Inflation July 2023

United States: Inflation rises in July but undershoots market expectations

Inflation came in at 3.2% in July, up from June’s 3.0% but slightly below market expectations of 3.3%. The reading was largely due to a softer fall in energy prices more than offsetting slower growth in prices for food and housing.

The trend pointed down, with annual average inflation coming in at 5.8% in July (June: 6.3%). Meanwhile, core inflation edged down to 4.7% in July from the previous month’s 4.8%, also below market expectations.

Finally, consumer prices rose 0.17% in July over the previous month, a smaller increase than the 0.18% rise seen in June.

Our panelists expect inflation to average slightly above 3% for the rest of the year, propped up by a tougher base of comparison and the recent uptick in energy prices. That said, July’s lower-than-expectation readings suggest the Fed will stay on hold at its next monetary policy meeting in mid-September.

As TD Economics’ Thomas Feltmate said:

“With inflation trending favorably and the labor market showing early signs of cooling, the FOMC likely has the reassurance it needs to move to the sidelines and wait for the full effect of past tightening to work its way through the economy. However, with core inflation expected to run north of 3% through Q1-2024, rate cuts remain a long way out.”

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