US inflation cools in July, but the Fed's September decision stays open (2026)

This article is automatically created by NeoDrop

Data through 07:30 on August 13, 2026 (UTC+08:00). Research cutoff: 23:30 UTC on August 12.

Lead deep dive

U.S. inflation gave the Federal Reserve a reason not to rush into another rate increase, but it did not give policymakers a clean victory. The Consumer Price Index rose 0.1% in July after falling 0.4% in June. Annual inflation eased to 3.4% from 3.5%, while core CPI rose 0.2% after being flat in June. 1

The headline was helped by fuel. Gasoline prices fell 2.9% in July, following a 9.7% decline in June. That matters because the Middle East conflict has kept energy supply at the centre of the inflation debate; the July data showed limited pass-through from the earlier oil shock, but economists expect prices to pick up in August as higher energy costs work through the comparison. 1

The softer number was not spread evenly across the basket. Shelter rose 0.1%, core services excluding shelter rose 0.2%, healthcare prices rebounded 0.4%, and airline fares climbed 2.2%. Information-technology goods also rose 1.4%, including a 3.5% increase in computers, peripherals and smart-home assistants. The reading says gasoline is currently doing much of the disinflation work; it says less about whether underlying price pressure has been extinguished. 1

Markets treated the report as a reprieve. The probability of a Federal Reserve rate increase at the September 15-16 meeting fell to about 38%, from 48.4% the day before, while traders priced a 62% chance of no change. The Fed's benchmark rate remains at 3.50%-3.75%; the September decision will still come after another inflation report and an employment report. 1

Traders work on the floor of the New York Stock Exchange — *NYSE traders in New York on August 7, 2026; the photograph accompanied Reuters' report on the August 12 market close. 2*

The market reaction was also an earnings story, not only a rates story. The S&P 500 rose 0.26% to 7,748.50, the Nasdaq gained 0.54% to 26,588.49, and the Dow slipped 0.04% to 53,770.27. CoreWeave and other AI-infrastructure companies rallied after stronger forecasts, giving investors a second reason to buy risk even as the inflation report reduced the immediate rate threat. 2

That combination is useful but fragile. Lower inflation can support technology valuations by reducing the discount rate, while heavy AI investment can support corporate earnings and capital spending. Yet inflation-adjusted average hourly earnings fell 0.2% from a year earlier, and the July report still leaves inflation well above the Fed's 2% target. Investors can celebrate a cooler monthly number while households continue to feel squeezed. 1

The next tests are concrete: whether August gasoline prices reverse, whether core services stay near July's pace, and whether employment recovers after July's surprise job losses. Until those data arrive, the market has repriced the chance of a September hike; it has not received a decision from the Fed.

Nine other stories

CoreWeave's AI backlog grew, but so did its spending needs. Shares rose more than 19% after the AI cloud company lifted its revenue, profit and capital-spending forecasts. Its backlog rose from $99.4 billion in the first quarter to $104.2 billion in the second, with more than $25 billion in new commitments secured early in the current quarter. The signal is strong demand, paired with a more capital-intensive business. 3
South Korea set targets for seven new technology industries. President Lee Jae Myung's government outlined plans covering small modular reactors, fusion, renewables, quantum computing, space, biotechnology, and critical minerals. Targets include a domestic 100-qubit quantum processor by 2029, a lunar landing by 2030, and 10 trillion won ($7.1 billion) for materials, parts and equipment by 2030. 4
Zambia votes with an economic recovery on trial. President Hakainde Hichilema is widely expected to win a second term after steering the copper producer through debt restructuring and a post-default rebound. The opposition is divided, but voters say lower inflation and improved indicators have not yet translated into enough jobs or relief from the cost of living. 5
An Indonesian ferry fire killed one and sent 212 people to port. The KM Putri Yasmin caught fire in the Lombok Strait while travelling from Bali's Padangbai port to Lembar. Authorities rescued more than 200 people, but the manifest listed only 114 passengers and 17 crew, leaving overcrowding and the cause of the fire unresolved. 6
Colombia's earthquake rescue effort entered its third day. A 7.4-magnitude earthquake left at least 250 people dead, with rescuers searching collapsed buildings in Cali and Pereira. Reuters' photo report showed emergency workers calling for silence and clearing rubble for trapped survivors. 7
Millions watched a total solar eclipse across Europe. Totality reached northern Spain and western Iceland, with authorities expecting up to 6 million visitors in Spain and as many as 80,000 in Iceland. The event was western Europe's first total solar eclipse in 27 years; in Iceland, darkness lasted up to 2 minutes 13 seconds where skies allowed a clear view. 8
Ukraine paused some Black Sea tanker strikes after a reported U.S. request. The Financial Times reported that Kyiv had paused drone attacks on tankers using Russia's Novorossiysk port after Vice-President JD Vance raised concerns about disruption to Kazakhstan-linked oil flows. Reuters said it could not independently verify the report; a U.S. official confirmed Washington had warned against targeting non-Russian vessels and Caspian Pipeline Consortium infrastructure. 9
The South African rand held near a five-month high. The currency strengthened 0.3% to 16.1350 per dollar, its strongest level since March 2, as softer U.S. inflation weakened expectations of a September Fed hike. South Africa's benchmark 2035 bond yield moved 13 basis points higher to 8.435%, showing that currency optimism did not translate cleanly into local bond demand. 10
Two U.S. Army soldiers died in an Apache helicopter crash. An AH-64 attached to Fort Hood crashed into a field in Bell County, Texas, about 60 miles north of Austin, and triggered a large grass fire. Fort Hood confirmed the two deaths but withheld the soldiers' names pending notification of their families. 11

Quote of the day

"While not definitive, the report should further ease the Fed's fears about an energy-driven inflation spiral."
— Scott Anderson, chief U.S. economist at BMO Capital Markets. 1

US inflation cools in July, but the Fed's September decision stays open

Lead deep dive

Nine other stories

Quote of the day

Further reading

References

Related content