Fed Holds Fire on Rate Hike as Inflation Data Softens

The Federal Reserve is likely to keep interest rates unchanged in September after inflation data showed a modest slowdown. The Consumer Price Index rose 3.4 percent in the 12 months through July, down from 3.5 percent in June, matching economists' expectations.

The Bureau of Labor Statistics reported that core CPI increased 2.5 percent in the 12 months through July after climbing 2.6 percent in the prior month. However, Omair Sharif, founder of Inflation Insights, noted that there were indications of broadening inflation, with technology prices driven by demand for artificial intelligence jumping and gasoline prices falling.

The Fed targets 2 percent inflation by the 12-month change in the Personal Consumption Expenditures Price Index. Despite the deceleration in year-over-year CPI last month, Sharif estimates that even with core PCE still looking on course to be a bit above 3 percent.