Earlier today, inflation numbers were released, and the rate of increase landed about where expected.
The CPI increased by 2.7% in July on an annual basis. The core CPI, removing food and energy, was a bit hotter at 3.1% in July 2025 from July 2024.
Markets were worried about a hotter number due to the on again, off again tariff negotions as many expect these tariffs to drive prices higher. These predictions have been much ado about nothing. At least so far.
Isaac Wheeler, Managing Director of Balance Sheet Strategy, at Derivative Path, noted that CPI data came in largely as expected, with little evidence of the tariff-driven inflation pressures that Federal Reserve Chairman Powell has worried about as a key risk at the FOMC’s last meeting.
“The benign print should pave the way for a 25-basis point rate cut in September and suggests we may finally transition from the one-time recalibration cuts of 2024 toward a sustained easing cycle,” predicted Wheeler. “For banks, the implications of this shift are significant. Institutions hedging rising rates have increasingly turned to options-based strategies like collars to minimize potential downside should rates fall.”
Many market observers expect a cut in December, with one or two to follow before the end of the year. Perhaps a bigger question is if the first cut will be more aggressive. A 50 bps cut could be in the works, depending on the interim data.
While CPI was today, multiple reports will precede the next Fed meeting, which will drive the central bank’s decision.