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July CPI Report Puts Fed in a Tight Spot as Markets Anticipate Rate Cuts
July CPI Report Puts Fed in a Tight Spot as Markets Anticipate Rate Cuts
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Inflation data for July delivered mixed signals, with Core CPI rising 3.1% annually—above expectations—while headline inflation came in slightly cooler at 2.7%. The Federal Reserve now faces heightened scrutiny over its September rate decision as markets price in a 92% probability of a 25-basis-point cut.
Services sector inflation continues to drive above-target price growth, complicating the Fed's dual mandate. "Tariff effects remain negligible, but services prices are running hot enough to push CORE PCE higher," noted Capital Economics' Stephen Brown. Meanwhile, growing concerns about labor market stability among Fed members suggest policymakers may prioritize economic support over inflation containment.
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