The CPI Show

August 12, 2026

Elias Haddad

US July CPI to firm, not heat up. USD risks skewed to the downside.

Leading inflation indicators were mixed in July.

Slower US wage growth and strong productivity growth remain key disinflationary forces.

Markets are in a holding pattern ahead of today’s critical US July CPI report (1:30pm London, 8:30am New York). The print will be a key swing factor for Fed funds rate expectations and set the tone across rates, currencies, and broader risk sentiment. Fed funds futures currently price in 50% odds of a 25bps hike in September to a target range of 3.75-4.00%, down from a high of 75% end-July, and just over 40bps of cumulative tightening in the next twelve months.

A soft US CPI would strengthen the case for a dovish repricing in Fed hike expectations and further undermine USD while lifting risk assets. A hot US CPI will likely deliver a kneejerk USD bounce via higher front-end yields. However, with Fed policy already restrictive (assuming a neutral rate of 3.00%), the scope for a material hawkish repricing looks limited which is a USD headwind.

US July CPI to firm modestly but stop short of signaling a renewed acceleration in inflation. Headline CPI is expected to rise +0.1% m/m vs. -0.4% in June and ease to 3.4% y/y vs. 3.5% in June. Core CPI is expected to rise +0.2% m/m vs. 0.0% in June and ease to 2.5% y/y vs. 2.6% in June.

The three-month change in core and headline CPI will offer a cleaner read on whether inflation momentum is decelerating or reaccelerating. In parallel, CPI measures which filter out extreme price swings, like trimmed mean, median, sticky, and super core will be key to judging the underlying inflation trend. Both the Atlanta and Cleveland Fed CPI prints will be published at 11:00am New York (4:00pm London).

Leading inflation indicators were mixed in July. The pick-up in the ISM Services Prices Paid index suggests upside risks to inflation have yet to fully recede. But the NFIB Small Business Optimism index showed both actual and planned price increases dropped notably from June. More broadly, the slowdown in US wage growth combined with strong productivity growth remains an important disinflationary force by containing unit labor costs.

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