The week was dominated by July’s price data, which confirmed a picture of contained inflation and eased pressure on the Federal Reserve (Fed). The CPI rose 0.1% month-over-month and slowed to 3.4% year-over-year, whilethecore index rose 0.2% and eased to 2.5%, both in line with consensus estimates. Housing accounted for nearly two-thirds of the monthly increase, with notable rises in healthcare (0.4%), used cars (0.4%), and airfare (2.2%). On Thursday, the Producer Price Index remained unchanged compared to June’s 0.1% decline, reinforcing the disinflationary reading. With these figures, the implied probability of a rate hike in September fell to around 42% according to the CME’s FedWatch tool, down from nearly 50% previously, although Cleveland Fed President Beth Hammack maintained that now is the time to act to bring inflation back to 2%.

Consumer spending, however, showed signs of weakness: July retail sales fell 0.6% month-over-month—the worst performance since May 2025 and well below the expected 0.1% increase—and the University of Michigan’s consumer confidence index dropped nearly 8% in the preliminary August reading to 51 points, ending two months of improvement. Initial jobless claims rose by 9,000 to 209,000, and inflation once again outpaced wage growth for the fourth consecutive month, with the savings rate at a four-year low.