According to the Reuters survey of economists, the U.S. July headline CPI annual rate is projected to decline to 3.4% from June's 3.5%, while core CPI is expected to fall to 2.5% from 2.6% the previous month. For Citi's economists, a second consecutive month of softer inflation readings, as anticipated, would indicate that more than one month of data point to cooling price pressure, essentially removing the possibility of a September interest rate hike. At the same time, economists surveyed also expect core services inflation to edge higher, with month-on-month price gains of 0.3% in July after holding steady through May and June. Bank of America analysts, however, argue that a rebound in core services could keep a September hike on the table. If that latter scenario prevails and the inflation data comes in below expectations, Fed tightening might be postponed until December or later, according to BofA analyst Kate Duguid.
Economists surveyed by Reuters expect U.S. headline CPI to slow to 3.4% year-over-year in July from 3.5% in June, with core CPI easing to 2.5% from 2.6% a month earlier, as cited by Jinshi.
Citi's economists said that if inflation readings soften for a second consecutive month as anticipated, it would mean more than one month of data pointing to easing price pressures and essentially rule out a September rate increase. They also project core services inflation to edge up 0.3% month-on-month in July, after holding flat from May through June.
Bank of America analysts countered that the rebound in core services could keep a September hike on the table. If that view prevails and inflation undershoots expectations, the Fed could delay a move to December or later, according to BofA analyst Kate Duguid.
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