Inflation in the USA turned out to be lower than forecast. Traders expect Fed rate cut in September

U.S. consumer prices rose less than expected in July, according to data released on August 12. The data suggests that Donald Trump's trade war is having a moderate impact on prices so far. But there is growing concern in the market about the quality of the statistics, Reuters warns: the agency responsible for collecting the data has been hit by spending cuts and has begun to reduce its samples.

Consumer prices in the United States (CPI) in July rose by 2.7% in annual terms - exactly the same as in June, reported the U.S. Bureau of Labor Statistics. The result was below analysts' forecasts - they expected growth to accelerate to 2.8%, according to Reuters.

Compared to the previous month, prices rose by 0.2%, as forecasts suggested. The growth rate slowed down compared to June, when it amounted to 0.3%.

At the same time, consumer prices excluding the cost of food and energy (Core CPI) last month rose by 0.3% - the highest increase since January. Contributing to the acceleration in core inflation was a rise in the cost of goods - such as toys, sporting goods, household goods and appliances - due to import duties, Reuters notes. On an annualized basis, prices rose 3.1 percent, compared with a forecast of 3 percent. Fed officials generally consider core inflation a more accurate gauge for long-term trends, CNBC notes.

After the report was published, futures on the S&P 500 index jumped 0.4%. The yield on 10-year U.S. Treasury bonds fell by four basis points to 4.25%. At the same time, the report put pressure on the dollar - it fell in price by 0.2%.

Traders are now putting more than two Fed rate cuts by December in their forecasts and are pricing in a high probability of a rate cut as early as next month, Bloomberg writes.

Inflation data play an important role in Wall Street's expectations of Federal Reserve policy. However, there is growing concern in the market about the quality of inflation and employment reports after budget and staff cuts at the Bureau of Labor Statistics, Reuters writes. Concerns intensified after Donald Trump fired BLS head Erica McEntarfer in early August following the release of July data on the U.S. labor market, which included a sharp revision with a deterioration in the previous two months.

The BLS has long been underfunded, and Trump's unprecedented campaign of government spending cuts and massive layoffs of government workers has only made matters worse. Earlier this year, the Bureau of Labor Statistics completely halted data collection for the CPI index in three cities in Nebraska, Utah and New York and reduced the sample size by 15% in the remaining 72 cities participating in the study. Officials attributed this to the need to "match the amount of work with the amount of resources."

As a result, the Bureau of Labor Statistics now uses conditional estimates to fill in missing information - for example, calculating the price of an item based on how it changed previously. The share of such estimates in CPI data rose from 30% in May to 35% in June. At the same time, it was only 8% in June 2024, Reuters points out.

This article was AI-translated and verified by a human editor