TLDR
- July CPI data due Wednesday is expected to show 0.1% monthly rise and 3.4% annual rate
- Core inflation is forecast at 0.2% monthly and 2.5% annually, both still above the Fed’s 2% target
- The Fed voted 9-3 to hold rates at 3.5%-3.75% at its July meeting, with three dissenters wanting a hike
- Fed Chair Kevin Warsh faces pressure to act if inflation stays stubborn, with markets pricing September as a 50-50 call for a rate hike
- Bank of America still expects three rate hikes in coming months if inflation does not cool
Wednesday’s consumer price index report is one of the most closely watched inflation prints in months. It could decide whether the Federal Reserve raises interest rates in September or waits longer.
Most inflation forecasters see the core CPI rounding down to 0.2% in July.
Given recent Fedspeak, the next few months of the core PCE inflation measure could be important in determining whether policymakers maintain their forecast of gradual disinflation with no policy change. pic.twitter.com/BzyjmginXr
— Nick Timiraos (@NickTimiraos) August 10, 2026
Economists expect the headline CPI to rise just 0.1% in July, with the annual rate coming in at 3.4%. Core inflation, which strips out food and energy, is forecast at 0.2% for the month and 2.5% year-over-year. Both are still well above the Fed’s 2% target.
The data lands at 8:30 a.m. ET from the Bureau of Labor Statistics.
Why This Report Matters So Much
The stakes are high because the Fed is already divided. At its July meeting, the Federal Open Market Committee voted 9-3 to hold its benchmark rate at 3.5%-3.75%. The three dissenters all wanted a quarter-point increase.
Fed Governor Lisa Cook has also indicated she could support a hike if inflation does not improve. Cleveland Fed President Beth Hammack, one of the July dissenters, went further on Monday, saying multiple rate increases will likely be needed.
“One 25-basis-point move probably doesn’t do a whole lot for the economy,” Hammack said.
Markets are currently pricing September as a coin flip for a hike, with slightly better odds pointing to October or December, according to CME FedWatch data.
RSM chief economist Joe Brusuelas said a mild July CPI print would let the Fed stay on hold for the rest of the year. “If we get a July CPI report anywhere near my forecast, the balance of the committee is going to look right through the supply shock,” he said.
Pressure Builds on Fed Chair Warsh
Fed Chair Kevin Warsh took the job in May and has made fighting inflation his top priority. But his July press conference left investors confused. He suggested rising bond yields were doing some of the Fed’s work and hinted at redefining the inflation target, without clearly committing to rate hikes if needed.
The 30-year Treasury yield rose while he spoke and has not come back down. That is unusual around a Fed meeting and has raised questions about the market’s confidence in Warsh’s resolve.
Bank of America is still calling for three rate hikes ahead. The firm said the July jobs report, which showed nonfarm payrolls falling by 23,000, did not change the labor market picture enough to shift the Fed’s focus away from inflation.
If both July and August inflation readings come in firm, Warsh may have to choose between hiking rates or holding while facing more dissents inside the committee.
A cool reading Wednesday would ease that pressure and give him space to lay out his thinking at the Jackson Hole conference later this month.
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