Cooling Inflation and Resilient Labor Market Support Fed Pause

The US inflation rate cooled for the second consecutive month in July, easing to 3.4% year-over-year from 3.5% in June. This development has strengthened expectations that the Federal Reserve will keep interest rates unchanged.

The Producer Price Index (PPI) remained flat during the month, helped by a 3.1% decline in energy prices. Core inflation moderated to 2.5%, reinforcing the view that underlying inflation is gradually moving in the right direction.

Meanwhile, initial jobless claims rose modestly to 209,000, but layoffs remain low, indicating a relatively resilient labor market. The unemployment rate held at 4.1%.