Hua Er Jie Jian Wen·2025-08-12 07:57Core Insights - The upcoming July Consumer Price Index (CPI) report is expected to show a slight increase in inflation, but not enough to alter the Federal Reserve's path towards a rate cut in September [1][4][8] - The consensus forecast for July CPI is a month-over-month increase of 0.2% and a year-over-year increase to 2.8%, while core CPI is expected to rise by 0.3% month-over-month and 3.0% year-over-year, marking the highest level since February [1][2][5] Inflation Expectations - Various financial institutions have provided their forecasts for July CPI, with a median expectation of 0.24% month-over-month and 2.8% year-over-year for overall CPI, and 0.31% month-over-month and 3.1% year-over-year for core CPI [2] - Deutsche Bank anticipates a divergence in short-term core inflation trends, with a three-month annualized rate rising to 2.7% while the six-month rate may drop to 2.4% [5] Impact of Tariffs - The data will serve as a critical signal to assess the impact of new tariffs on consumer prices, with Wells Fargo noting that the price transmission from tariffs is still in its early stages [4][6] - Goldman Sachs estimates that the direct contribution of tariffs to core inflation will be approximately 0.12 percentage points in the month [5] Market Reactions - The market is currently pricing in a high probability (89%) of a 25 basis point rate cut in September, driven by weak employment data [8][9] - JPMorgan's market intelligence team has outlined potential market reactions based on core CPI results, indicating that a month-over-month increase above 0.40% could lead to a significant drop in the S&P 500 [13] Data Quality Concerns - There are concerns regarding the quality of the CPI data due to budget cuts and reduced personnel at the Bureau of Labor Statistics, which may lead to increased volatility in the reported figures [10][11]