US consumer inflation likely continued to cool in July, though a rebound in core services prices could keep a September Federal Reserve rate hike on the table. A Reuters poll of economists projected headline CPI to rise 3.4% in the year to July, down from 3.5% in June. Core CPI was expected to ease to 2.5% year over year from 2.6%. Citi economists said a second consecutive month of soft readings would suggest more than one month of data point to easing price pressures, effectively removing the possibility of a September hike. But economists also expected core services inflation to climb 0.3% month over month in July after flat readings from May to June. Bank of America analysts said the pickup could keep September on the table. Analyst Kate Duguid said that if that view prevails and the inflation data come in below expectations, the Fed may push any hike to December or later. The mixed signals leave the path of US monetary policy open just weeks before the Fed's next meeting.
US inflation data is due with economists looking for headline CPI to slow in July, though an expected rebound in core services prices may keep the Federal Reserve's September meeting live.
The Reuters survey shows headline CPI at 3.4% year over year, down from 3.5% in June. Core CPI is seen easing to 2.5% from 2.6%.
Citi economists said a second straight soft reading would mean more than one month of data points to cooling price pressures, basically ruling out a September rate hike.
But the same economists expect core services prices to rise 0.3% month over month in July, after two months of no change. Bank of America analysts pointed to that pickup as a reason September remains on the table.
Kate Duguid, an analyst at the bank, said that if the services-side view wins the argument and inflation releases weaker than expected, a Fed hike may be postponed to December or later.
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