US CPI data set to show inflation heated up in July as tariff feed through prices

• The US Consumer Price Index is set to rise 2.8% YoY in July, at a faster pace than June’s 2.7% increase.
• The Fed is widely expected to cut the policy rate by 25 bps in September.
• July inflation data could significantly influence the US Dollar’s valuation.

The United States (US) Bureau of Labor Statistics (BLS) will publish the all-important Consumer Price Index (CPI) data for July on Tuesday at 12:30 GMT.

Markets will look for fresh signs of how US President Donald Trump’s tariffs are feeding through to prices. Therefore, the US Dollar (USD) could experience volatility on the CPI release, as the data could influence the Federal Reserve’s (Fed) interest rate outlook for the remainder of the year.

What to expect in the next CPI data report?

As measured by the change in the CPI, inflation in the US is expected to rise at an annual rate of 2.8% in July, having recorded a 2.7% increase in June. The core CPI inflation, which excludes the volatile food and energy categories, is forecast to rise 3% year-over-year (YoY), compared to the 2.9% acceleration reported in the previous month. 

Over the month, the CPI and the core CPI are seen advancing by 0.2% and 0.3%, respectively.

Previewing the report, analysts at TD Securities said: “We expect the July CPI report to show that core inflation gained additional momentum. We look for goods prices to gather further steam, as tariff pass-through continues to materialize. The services segment will likely not help offset that momentum. We project headline inflation to go sideways in July despite a deceleration in food and energy.”