July Consumer Inflation Rises, But Less Than Economists Fear: 'The Fever Has Broken'

The Consumer Price Index rose from 3% in June to 3.2% in July, narrowly missing the anticipated 3.3%.

Core inflation (excluding energy and food) was down marginally from 4.8% in June to 4.7% in July, cooler than the projected 4.8%. Traders pushed the broad market SPDR S&P 500 SPY more than 1% higher after the print.

After the economic data print, President Joe Biden said the July CPI data reflects a strong economy.

“Annual inflation has fallen by around two-thirds since last summer, and inflation outside of food and energy has fallen to its lowest level in any three-month period since September 2021,” Biden said in a statement.

Here’s what five economists and strategists are taking away from the inflation data.

Gina Bolvin, president of Bolvin Wealth Management Group, said: “The futures market is celebrating CPI but we have to get through Jackson Hole,” referring to the Federal Reserve’s upcoming Jackson Hole Symposium Aug. 24-26.

Bolvin said she remains bullish in the long term and is a buyer on dips.

Charlie Ripley, senior investment strategist at Allianz, underscored the continuing "soft landing" narrative, supported by consecutive months of limited inflation increases.

He emphasized the driving factor of shelter costs in inflation, while observing price drops in used vehicles and other goods. “Overall, the case continues to build for the Fed to be done with the hiking cycle,” Ripley said.

Sam Millette, fixed income strategist for Commonwealth Financial Network, said the slower-than-expected rise in consumer prices is a positive development.

“This report supports calls for a pause in rate hikes,” Millette said, adding that the Federal Reserve would still keep a close eye on income data before any decisions in September.

Oliver Rust at Truflation described the inflation print as a pivotal moment, signaling a potential reversal in trend.

Citing the firm’s independent CPI index, Rust said inflation is likely not under control in the U.S. Rust also underscored the challenges U.S. banks face in the backdrop of Moody's recent downgrades, emphasizing the balancing act the Fed is undertaking.

Calling on visual data issued by the Roosevelt Institute, Macro Policy Perspectives founder Julia Coronado posted on X after the print, saying: "The fever has broken, we are not in an inflationary regime when prices are this flexible and consumers are reverting to their prior price sensitive ways."

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