Almanac Trader — Path back to 2% inflation gets longer

Earlier today the Bureau of Labor Statistics released its CPI report for July 2025. Headline inflation was in line with expectations of a month-over-month (MoM) change of 0.2% while the year-over-year (YoY) change was slightly better than expected at 2.7%. However, core CPI increased 0.3% MoM and 3.1% YoY. Looking back at the last 12 CPI releases, the MoM percent change is averaging 0.2%. Based upon a MoM change of 0.2%, headline CPI will dip no less than 2.2% YoY in the next 12 months (grey line in chart). Even if the Fed does cut rates in September, persistent inflation could cause the Fed to quickly go back to holding rates steady.