US inflation eases in July

US inflation slowed in July, mainly reflecting drop in oil prices due to recent ceasefire in the Middle East, and signaling less pressure on the US central bank to raise interest rates in September.

The Consumer Price Index ticked lower to 3.4% (y/y) in July, in line with expectations, from 3.5% in June, while core inflation (excluding volatile food and energy components) rose by 2.5% last month (again meeting expectations) compared to 2.6% increase in June.

Inflation report follows the downbeat July labor data that also cooled expectations for Fed rate hike on signals on unexpected and significant weakening in the US labor market, one of pillars of the economy, along with inflation.

The US central bank kept interest rates unchanged in July policy meeting and did not provide more details about their next steps, except signaling that policymakers will continue to assess the situation through the economic data and act accordingly in the next meeting (the Fed will have August labor and CPI data released before September 15-16 policy meeting.

Analysts expect labor market to strengthen after the latest weakness, partially driven by seasonal factors and expect increased price pressures, as oil prices rose again.