The US Bureau of Labor Statistics will release the July Consumer Price Index (CPI) data at 8:30 PM Beijing time today. The market expects the July unadjusted CPI annual rate to come in at 3.4%, down 0.1 percentage points from the previous reading. The forecast for the July unadjusted Core CPI annual rate is 2.5%, also 0.1 percentage points lower than the prior month. While both key inflation metrics are expected to decline, the reductions are slight, indicating overall stability in price pressures.
US inflation trends are closely linked to international energy prices. By examining the monthly price movements of WTI and Brent crude oil, one can gauge the potential performance of US CPI data. As shown in the chart, both WTI and Brent crude posted significant gains in July, with monthly highs reaching $92 and $100 per barrel, respectively. Although financial institutions generally expect the July CPI and Core CPI annual rates to each fall by 0.1 percentage points, the rising trend in oil prices suggests a possibility that both inflation metrics could exceed their prior readings.
The trajectory of US inflation is also tied to the broader economy and the Federal Reserve's monetary policy stance. A major economic event impacting the US in July was the escalating conflict in the Middle East. Media reports indicate that Iran's position is increasingly assertive, reducing the likelihood of the US achieving its strategic objectives. This development is likely to dampen confidence and expansion plans for US companies, particularly multinational corporations. Excluding the inflationary boost from international energy prices, the actual underlying US inflation rate may have already declined significantly.
In the second half of 2025, the Federal Reserve cut interest rates three times, for a total of 75 basis points. The current federal funds rate range stands at 3.5% to 3.75%, a level that remains historically elevated. This high rate naturally curbs consumer demand, especially in sectors reliant on credit, such as the real estate industry. From this perspective, even if US inflation does not decline rapidly, a significant rebound seems unlikely.
Fed officials generally hold a hawkish view on inflation data. For instance, Cleveland Fed President Beth Hammack believes the current interest rate is not materially restrictive to the US economy and suggests further rate increases are needed. Minneapolis Fed President Neel Kashkari stated that his goal is not to cause an economic slowdown but to achieve the 2% inflation target, adding that it is time to begin gradually raising the policy rate. The Federal Reserve's next interest rate decision is scheduled for September 18th. Financial institutions currently estimate the probability of a rate hike at that meeting to be under 50%. However, looking further ahead to the end of the year, if inflation data continues to hover around 3%, the probability of the Fed opting for a single rate hike increases significantly.
In summary, the July US CPI annual rate is likely to deviate little from the prior month's reading. However, contrary to the market's expectation of a 0.1 percentage point decline, the final CPI result could potentially exceed the previous value due to the sharp rise in WTI and Brent crude oil prices in July. The September Fed rate decision will be influenced by the July CPI data, but the probability of a rate hike remains low. For gold and silver, a moderately fluctuating CPI data point will not have a significant impact on their prices. However, if the data significantly deviates from expectations, particularly to the upside, expectations for a Fed rate hike would surge. This would boost the US dollar index while simultaneously putting pressure on gold and silver prices.
Market risk exists, and investment requires caution. The above content represents only the analyst's personal views and does not constitute any investment advice. This report should not be used as the sole reference for decision-making. Analysts' opinions may change over time, and updates will not be provided separately.