Inflation is no longer hammering the US economy in the same way
Summary
- US inflation has significantly slowed, with consumer prices rising only 0.1% in July from June and 3.4% year-on-year, aligning with market expectations.
- The Federal Reserve's stance on interest rates remains cautious, with the probability of a rate hike decreasing to 40% following weaker employment figures and the latest inflation data.
- The decline in fuel prices contributed to the slowdown in inflation, although a potential rise in crude oil prices could lead to an acceleration in August.
- Market volatility in interest rate expectations persists as the Fed remains silent on its monetary policy stance, relying heavily on economic data.
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Automatic translation: Originally published in Finnish 12/08/2026, 15:16 GMT. Give feedback here.
US inflation is increasingly becoming a non-story. The rise in consumer prices almost halted in July on a monthly basis. This reinforces the Federal Reserve's "no rush to hike yet" narrative.
US inflation figures
Source: LSEG
Consumer prices rose by 0.1% in July from June and by 3.4% year-on-year, which was in line with market expectations. The slowdown in inflation was largely due to fuels, whose prices decreased for the second consecutive month. The rise in core prices also eased to 0.2% month-on-month and 2.5% year-on-year. Prices are expected to accelerate again in August, as crude oil prices have recently been on the rise.
Oil price, USD/bbl
Source: LSEG
For the Fed's rate hike expectations, the latest inflation data followed Friday's weaker-than-expected employment figures. The probability of a rate hike has now decreased to around 40% according to CME Group's FedWatch, compared to 54% a week ago. Since the Fed remains silent on its monetary policy stance, the market is pricing its expectations more strongly based on economic data. This naturally increases volatility, which has always been present in interest rate expectations. Overall, the economic figures point towards cooling growth, which also gives the central bank room to maneuver.
