The annual inflation rate in the United States was reported to rise to 2.7% in July, up 0.2 percentage points from June.
The core inflation rate, excluding volatile food and energy prices, rose by 0.3% to 3.1% year-on-year. Both measures are consistent with consensus predictions.
The monthly rise in title inflation is driven by higher housing costs (+0.2%) and non-energy services (+0.4%). According to the BLS, the food index has not changed, with food far away from food at home, and food at home has dropped by 0.1%.
Service prices have risen across multiple categories, including healthcare (+0.8%) and other personal services (+0.6%). Travel costs rose 0.7%, ending a five-month decline.
By comparison, energy costs fell 1.1% in July, gasoline prices fell 2.2% and energy commodities fell 1.9%.
“Service inflation did push prices up last month, while commodity and commodity inflation rates remain softer than expected,” BMO’s Scott Anderson wrote in a research note. “This suggests that many businesses are still reluctant to trade full tariffs for fear of losing sales to more cautious consumers.”
Core inflation increases, labor softness keeps multiple cuts on the table
With higher expected tariff rates, labor data (including downward revisions in May and June), and rising core inflation, economists see a complex pathway to move forward through the year-end, the Federal Reserve (FED).
TD’s Thomas Feltmate said the Fed should rely on its employment requirements to provide relief, noting that current interest rates are still in “restrictive territory.” He expects multiple cuts at the end of the year.
“We are seeing a cut of one-third of the layoffs at the end of the year, bringing policy rates to 3.75%,” he noted.
Avery Shenfeld of CIBC said the data increased support for the September tax reduction as core inflation rose by 0.2%. Anderson agrees that as long as the U.S. job market continues to soften next month.
Although U.S. interest rates are not expected to change until the fall, inflation data this morning moved Canadian bond yields, which would affect fixed mortgage rates.
Canada’s 5-year bond yield fell to 2.92%, then rebounded to 2.95%, while the 10-year bond yield fell to 3.37% after the initial decline.
In the United States, 10-year fiscal yields rose by 4 basis points to 4.31%.
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Avery Shenfeld Brett Surbey CPI CPI Dashboard Economic Data Economic Indicators Federal Reserve Scott Anderson Thomas Feltmate U.S. Feeding U.S. inflation
Last modified: August 12, 2025
