US CPI to show inflationary pressures easing after recent war-driven rise

The closely watched consumer price index is seen rising 0.1% in July following a 0.4% decline in the prior month

By Vince Golle and Craig Stirling

 

Prices paid by US consumers probably inched up marginally last month after falling for the first time in six years, a welcome tempering in recent war-driven inflationary pressures.

 

The closely watched consumer price index is seen rising 0.1 per cent in July following a 0.4 per cent decline in the prior month, based on the median projection in a Bloomberg survey of economists ahead of Wednesday’s Bureau of Labor Statistics release. 

 

Excluding fuel and food, the so-called core measure probably rose 0.2 per cent from the previous month. The core CPI is estimated to have risen 2.5 per cent from July 2025, the smallest annual increase since February. 

 

In the wake of Friday’s weak July jobs report, the moderation in price growth may help alleviate some of the inflation anxiety at the Federal Reserve after three officials dissented on July 29 in favor of raising interest rates.

 

The CPI report is likely to show a cooling of energy-related price pressures that had intensified in the months immediately following the start of the US war with Iran at the end of February. 

 

Retail gasoline prices dropped in early July to an almost four-month low before climbing back above $4 a gallon late in the month. The report may also show that airfares eased as jet-fuel costs settled back.

What Bloomberg Economics Says:

“The CPI report will be crucial. We expect the core to fall to its lowest year-over-year reading since March 2021. That’d challenge the talking point popular among FOMC hawks that inflation has been above target for five years, hence the Fed needs to take drastic action.”

 

The recent pickup in inflation has so far done little to slow the economy. Government figures due on Friday are projected to show steady retail sales growth in July, extending a period of consumer resiliency. The same day, a University of Michigan survey is seen showing consumer sentiment declined in early August for the first time in three months.

 

Elsewhere, Chinese inflation, UK gross domestic product and monetary decisions from Norway to Australia will among the highlights.  

Asia

The week in Asia begins with the release Sunday of July inflation data from China. Consumer inflation is seen slowing a tad to 0.8 per cent, the slowest pace since January, while factory-gate price growth may ease to 3.8 per cent. 

 

In both cases, energy — not a recovery in domestic demand — will likely be the main driver of the advance, opening the door for fresh policy support from the People’s Bank of China later this year.

 

The Reserve Bank of Australia is expected to hold its key rate steady at 4.35 per cent on Tuesday after slightly softer than expected inflation in the second quarter prompted traders to slash bets on another interest rate hike this year. The focus will fall on updated quarterly forecasts, particularly the outlook for core inflation.  

 

India releases its inflation figures for July on Wednesday, with CPI seen holding mostly steady at 4.4 per cent on the back of higher food and energy costs. While that reading would be around the fastest since 2024, it would still be well within the Reserve Bank’s 2 per cent to 6 per cent tolerance ban, supporting the case for another hold when authorities meet in October. 

 

Japan unveils PPI figures for July on Thursday after the gauge accelerated a month earlier to the fastest clip in more than three years, as higher petroleum prices amplified costs for plastic and other materials. 

 

Elsewhere, Australia releases the NAB business confidence index for July, with the reading having edged closer to 0 after five straight negative readings through June. New Zealand’s manufacturing PMI for June on Friday will probably remain in expansionary territory for a 13th straight month. 

 

Taiwan’s revision of second-quarter GDP statistics on Friday will likely confirm that growth remained red-hot owing to continuing demand for AI-related chips.

 

Other countries releasing revised data for second-quarter GDP include Hong Kong, Malaysia and Singapore. India is scheduled to release trade data in the latter half of the week.

Europe, West Asia, Africa

The UK will publish growth numbers on Friday, in a report that’s seen likely to show resilience to the West Asia crisis during the second quarter. Economists predict an increase in GDP of 0.4 per cent, slower than the start of the year but still a robust pace.

 

Swiss data the same day are also expected to point to the economy weathering the energy crunch. The median forecast is for 0.3 per cent growth, close to the 0.4 per cent pace of the first quarter. 

 

A second reading on euro-region GDP comes out on Friday too, incorporating figures on industrial production released the previous day. 

 

One monetary highlight takes place in Oslo. Norwegian policymakers are likely to keep borrowing costs steady on Thursday, but analysts expect another close decision that could be swayed by the July inflation report due on Monday. 

 

Any sudden acceleration in underlying price growth may rekindle expectations of a quarter-point hike by Norges Bank. A surprise slowdown in June strengthened the prospect of no tightening until September, though. 

 

In Eastern Europe on Monday, Romanian officials may keep their rate steady at 6.5 per cent, the same level it’s been for the past two years. On Thursday, Serbian officials will also reveal their decision on borrowing costs, which have been unchanged since 2024.

 

Russian GDP data on Wednesday will likely show the economy resumed growth, if only meagerly, in the second quarter, after shrinking for the first time since 2023. July inflation data the same day are expected to show prices accelerated, in part due to gasoline shortages caused by regular Ukrainian strikes on oil refineries. 

 

Turning to the West Asia, Egyptian data on Monday will likely show the inflation rate rose by more than a percentage point, from 14.3 per cent in June, due to elevated oil prices. The central bank has held its rate steady at its past three meetings, opting for caution due to heightened geopolitical tensions.

 

And in Israel on Friday, annual inflation is predicted to have slowed to 1.5 per cent in July from 1.6 per cent in June. The Bank of Israel lowered its rate to 3.5 per cent from 3.75 per cent in July, with officials seeing leeway for further easing in the months ahead.

 

Across Africa, Kenya, Namibia, Mauritius and Uganda are all expected to stand pat on rates when their policymakers meet in the coming week, as officials assess inflationary pressures stemming from the war.

Latin America

Brazil’s July consumer prices report may show a modest easing that puts the annual inflation rate just under the 4.5 per cent top of central bank’s target range.  

 

Gimlet-eyed observers see the government’s pre-election fiscal stimulus and credit expansion drawing a line under Brazil’s recent bout of disinflation.

 

Brazil watchers are also keen to see minutes from the central bank’s Aug. 4-5 meeting, at which policymakers delivered a unanimous decision to cut the key rate to 14 per cent.

 

Given the volatile geoeconomics of the current moment, not much is expected by way of guidance. Traders and analysts now see daylight for one more quarter-point trim in 2026. 

 

Colombia’s July inflation report on Monday may present a bit of a disconnect, as the year-on-year figure likely printed higher for a fifth straight month — possibly topping 6.2 per cent — even as the monthly readings slowed for a third month.

 

Pacing the headline results, the core data are also elevated. The central bank’s most recent monetary policy report, posted Aug. 4, forecast 2026 inflation of 6.9 per cent, easing to 4.3 per cent in 2027.

 

Argentina also reports July consumer prices data, which may register a second-straight sub-2 per cent month-on-month figure while the annual reading hovers around June’s 33.5 per cent. 

 

The early call sees regulated consumer prices continuing to run above 2 per cent, while the core reading drifts higher from June’s 1.6 per cent print.