US July Inflation Meets Forecasts, Fed’s Rate Path Remains Open

US consumer inflation data for July came in almost exactly in line with market expectations.

July Inflation Numbers and Market Anticipations

■Consumer Price Index (CPI): monthly %0.1, annual %3.4

■Core Inflation: monthly %0.2, annual %2.5

■Core inflation recorded its slowest annual rise since March 2021.

■After June’s rare decline, the rise in July signals that price pressures remain persistent.

Core Inflation Deceleration and Energy Shock Impact

■The energy price shock stemming from the Iran conflict continued to ease in July.

■Lower energy pressure softens the core inflation trajectory, yet it remains a key factor for the Fed’s policy calculus.

Fed’s Policy Framework and September Meeting

■The Fed’s meeting on September 15‑16 will assess inflation pressures alongside the recent slowdown in employment growth.

■Meeting expectations suggest the Fed retains flexibility for either a rate cut or a hold, given the data’s alignment with forecasts.

Immediate Market Reactions

■Following the release, BIST 100 and other global indices displayed heightened volatility as investors await the Fed’s September decision.

■Stable rate expectations could usher in short‑term calm for risk assets.

Markets are interpreting the Fed’s continued commitment to combat inflation, while the core inflation slowdown has modestly eased short‑term rate expectations. Nonetheless, lingering energy price uncertainty and employment data volatility will keep risk factors elevated until the September meeting.