U.S. Core CPI Breaks Through Expected Ceiling

According to PANews, the US core CPI unexpectedly rose in July last year, reaching an annual rate of 3.1%, hitting a five-month high. This data exceeded market expectations of 3.0%, indicating that inflationary pressures have not yet fully eased.

Core Inflation Rises Again

The recent increase in the US core CPI annual rate is not an isolated phenomenon. In contrast, the overall CPI annual rate remained steady at 2.7% compared to the previous month, but market expectations had been for a further rise to 2.8%. However, the actual data did not increase as anticipated. This shows a divergence between core inflation and overall inflation trends — the core indicator continues to rise, while the overall indicator remains stable.

Better-than-Expected Economic Signal

The US core CPI exceeding market expectations indicates that inflation stickiness still exists. The core CPI excludes more volatile food and energy prices and is considered a better indicator of long-term inflation trends. This breakthrough to a five-month high suggests that service inflation and fundamental commodity prices continue to face upward pressure.

For policymakers and investors, this performance of the US core CPI implies that future monetary policy adjustments may be limited. Market expectations for interest rate movements have also been adjusted accordingly, especially when the US core CPI remains consistently above expectations, making inflation expectations more anchored.