U.S. inflation unexpectedly held steady in July, relieving the pressure on the Federal Reserve to speed up its normalization of monetary policy.
Consumer price inflation rose by an annualized 2.9% in July, the Labor Department said, missing expectations for an acceleration to 3.0%.
Inflation remains a central concern for markets as increasing price pressures would be a catalyst to push the Fed toward raising interest rates at a faster pace than currently forecast.
The Fed left rates on hold at the current range of 1.75%-2.00% last month and offered few additional signals for monetary policy, other than noting the solid economic strength, which kept a move in September firmly on the table.
Overall, the Fed tracks a different inflation measure, the personal consumption expenditures price index excluding food and energy, which eased back down to 1.9% in June.
The core PCE index had hit its 2% objective in May.
Friday’s release also showed that, month-on-month, CPI rose 0.2% in July, in line with the consensus forecast.
Core CPI, a key gauge of underlying consumer price pressures that excludes food and energy costs, increased by 0.2% from a month earlier, in line with forecasts.
In the 12 months through July, core CPI rose 2.4%, compared to 2.3% a month earlier. Economists were looking for it to hold steady at June’s 2.3% advance.
Core prices are viewed by the Federal Reserve as a better gauge of longer-term inflationary pressure precisely because they exclude the volatile food and energy categories. The central bank usually tries to aim for 2% core inflation or less.