Posted on 08/12/2025 6:35:59 AM PDT by Red Badger
Key Points
The consumer price index increased a seasonally adjusted 0.2% for the month and 2.7% on a 12-month basis, the Bureau of Labor Statistics reported Tuesday.
Excluding food and energy, the core CPI increased 0.3% for the month and 3.1% from a year ago, compared with the forecasts for 0.3% and 3%.
Following the report, traders ramped up bets that the Federal Reserve would start reducing rates again in September.
Tariffs did appear to show up in several categories, but other areas that normally would be hit by import duties showed little reaction.
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A widely followed measure of inflation accelerated slightly less than expected in July on an annual basis as President Donald Trump’s tariffs showed mostly modest impacts.
The consumer price index increased a seasonally adjusted 0.2% for the month and 2.7% on a 12-month basis, the Bureau of Labor Statistics reported Tuesday. That compared with the respective Dow Jones estimates for 0.2% and 2.8%.
Excluding food and energy, the core CPI increased 0.3% for the month and 3.1% from a year ago, compared with the forecasts for 0.3% and 3%. Federal Reserve officials generally consider core inflation to be a better reading for longer-term trends. The monthly core rate was the biggest increase since January.
A 0.2% increase in shelter costs drove much of the rise in the index, while food prices were flat and energy fell 1.1%, the BLS said. Tariff-sensitive new vehicle prices also were unchanged though used cars and trucks saw a 0.5% jump. Transportation and medical care services both posted 0.8% moves higher.
Stock market futures posted gains after the report and Treasury yields were mostly lower while traders also ramped up bets that the Federal Reserve would start reducing rates again in September.
Tariffs did appear to show up in several categories.
For instance, household furnishings and supplies showed a 0.7% increase after rising 1% in June. However, apparel prices were up just 0.1% and core commodity prices increased just 0.2%. Canned fruits and vegetables, which generally are imported and also sensitive to tariffs, were flat.
“The tariffs are in the numbers, but they’re certainly not jumping out hair on fire at this point,” former White House economist Jared Bernstein said on CNBC. Bernstein served under former President Joe Biden.
The report comes at both a critical time for the economy and the BLS itself, which has come under Trump’s criticism for what he has charged is political bias against him. Trump fired the prior BLS commissioner after a surprisingly weak July nonfarm payrolls report earlier this month, and on Monday said he would nominate E.J. Antoni, a critic of the bureau, as the new chief.
The bureau has been hampered by budget and staffing cuts and has halted data collection in multiple cities. Along with that, the data has had to impute values in a number of the goods and services it tracks, leading to questions over accuracy and credibility.
While the political jockeying has occurred, Fed officials have been watching inflation measures closely as they weigh their next interest rate decision in September.
“Inflation is on the rise, but it didn’t increase as much as some people feared,” said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management. “In the short term, markets will likely embrace these numbers because they should allow the Fed to focus on labor-market weakness and keep a September rate cut on the table. Longer term, we likely haven’t seen the end of rising prices as tariffs continue to work their way through the economy.”
At issue is whether the tariffs will cause a one-time price increase or will lead to a lasting upturn for inflation. Economists generally view tariff impacts as the former though the broad swath of items covered under Trump’s edicts have sparked worries that the effect could be longer lasting.
Futures market pricing is pointing strongly to a Fed rate cut in September. However, a raft of data between now and then could influence both the decision for that meeting and the central bank’s future course. Fed officials of late have been expressing increasing levels of concern about the labor market, which would bode for rate reductions.
Traders increased the implied odds for a September move following the release, and also put the chances of another reduction in October at about 67%, up from 55% the day before, according to the CME Group’s FedWatch tool.
The CPI is not the Fed’s primary inflation forecast tool. The central bank uses the Commerce Department’s personal consumption expenditures price index, but the CPI, as well as the producer price index that is scheduled to be released Thursday, feeds into that calculation.
Inflation-adjusted average hourly earnings rose just 0.1% for the month, the BLS said in a separate release. That put the annual gain at 1.2%.
They misspelled hoped.
ISWYDT!.................
Typical liberals.
INB4 the MSM stats that “Lower price gains are bad for women and minorities” or something stupid.
what are these “tariff worries” they keep lamenting? Not once has a “tariff worry” effected my behavior.
And Climate Change...................
Collective media-crats, “we had hoped for such awful things for the American people”.
Summary - it's amazing that state and local taxes don't affect the cost of living. Just tariffs at the national level.
How nice. My income didn’t raise by even a penny.
The 3.1% core Y/Y number is the critical one.
There is one more significant measure before the September fed meeting and that will be PCE in a couple of weeks.
It will probably come in in about 3.2% and that will confirm an upward inflection to what had been a decline in inflation, and will indicate a Powell error last year in cutting 0.5%.
Wall Street hype will definitely point at and talk about the jobs numbers, but make no mistake about this. Inflation is what moves to Fed and if we are at 3.2% and climbing, the direction of rates is not going to be done.
CNBC: when it’s a rat admin predict fabulous economic news and be surprised when it sucks.
When it’s Republican predict disaster and be surprised when it’s good.
The US dollar has dropped 11.7 percent since January. Everything the US buys from abroad with paper dollars went up due to the weaker dollar….THEN throw in the different types of inflation.,supply side, money printing, etc…
The true figure is running much, much higher.
LONDON (Reuters) -Stocks rallied worldwide on Tuesday as U.S. consumer prices data allayed concerns that tariffs were already starting to raise inflation, hours after Washington and Beijing agreed a trade war truce that staved off a surge in levies on Chinese imports.
“ Excluding food and energy, ”
So they are still doing that BS. Biden stated that to rig his numbers. If you put them back in as they should be the numbers are much better
During (D) years the press just says this is “the new normal”.
Consumer prices not on the rise due to tariffs from the two weeks after Trump took office price gouging across the board of products increased.
Even products that are produced 100% in this country are inon that gig.
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
“ Excluding food and energy, ”
So they are still doing that BS. Biden stated that to rig his numbers. If you put them back in as they should be the numbers are much better
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Core inflation measures have been the norm for many years prior to Biden. The Fed uses makes use of Core for the PCE since 2012 per GPT.
The CPI is a primarily Urban measure. PCE, the Fed’s fave measure, is both Urban and Rural.
FR should not be in a kneejerk mode about inflation reports. The media wants to jump up and down and yell tariff tariff tariff, but truth is you don’t need tariffs to get inflation spikes — and there is no sign whatsoever of the deficit this year being under, say, $1.5T, nor next year, nor the year after. Oh, and tariff revs is the only reason I just said $1.5T rather than $2T.
Gas prices are higher for me than they were when Trump took office. They didn’t go up or down when Trump took office. They stayed the same until the Iran thing. Then they shot up and have never even come back down to what they were before that.
Consumer prices rise 2.7%?
But my income didn’t rise. And some people wonder why most people are not buying the bigger ticket items, housing sales are pretty much idle or flat.
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