July’s inflation data told a split story. Headline Consumer Price Index (CPI) looked benign, but core CPI rose 0.32% MoM and 3.1% YoY, its second-largest monthly gain of the year. That left the three-month annualized pace at 2.8%—well above the Fed’s 2% target and heading in the wrong direction. The real shock came with producer prices: PPI jumped 0.9% MoM, the steepest in over three years, with services up 1.1% and core PPI at 3.7% YoY. Portfolio management costs surged nearly 6%, while trade margins spiked 2%, signaling tariffs and input costs are filtering through although mainly on financial services not goods.
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The effect was immediate: odds of a 50bps September cut fell, long-end Treasury yields rose, and gold logged its worst week since June. Equities largely shrugged it off, but inflation risk is re-pricing the curve.

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