U.S. Core CPI Rises 3.1% Year-Over-Year as Inflation Pressures Persist

The U.S. consumer price index (CPI) remained unchanged at 2.7% year-over-year in July 2025, in line with expectations and reflecting a measure of stability in headline inflation [1]. However, the core CPI—excluding the more volatile components of food and energy—rose 0.3% from the previous month and 3.1% on a year-over-year basis, underscoring the persistence of inflationary pressures in key sectors such as housing, healthcare, and transportation [1].

The 0.2% monthly increase in the headline CPI was driven in part by falling energy prices, which dropped 1.1% in July, with gasoline prices alone falling 2.2%. This decline offered temporary relief to consumers at the pump and supported the narrative that inflation may be moderating. Yet, the core inflation figure told a different story. Essential services such as medical care and transportation each increased 0.8% in July, while shelter costs—accounting for over a third of the CPI—rose another 0.2% [1]. Used car prices, often seen as an indicator of broader consumer demand, also defied expectations by rising 0.5%.

These trends highlight the growing complexity in the Federal Reserve’s inflation assessment. While energy declines may offer a short-term reprieve, the resilience of core inflation—particularly in labor-intensive sectors—suggests that underlying price pressures are not yet under control [1]. Analysts had previously predicted a headline CPI of 2.8% and a core rate of 3.0%, so the actual data, while slightly below forecasts, still falls short of the significant cooling the Fed would prefer [2].

The inflation report comes at a critical moment for the Fed, as markets are still priced for a September rate cut. Yet, the data may force a reconsideration of that timeline. If the Fed moves too soon to ease, it risks reigniting inflation in a still-tight labor market. Conversely, maintaining higher rates for longer could increase the risk of a policy misstep if underlying economic conditions weaken faster than anticipated [1].

For financial markets, the mixed signals from the CPI report have created uncertainty. While the headline figures briefly lifted risk assets—such as the Dow futures—cryptocurrencies like Bitcoin showed little reaction, reflecting cautious sentiment. Historically, digital assets tend to perform better in a dovish environment, but persistent core inflation could delay or water down the magnitude of upcoming rate cuts [1]. A “hawkish cut,” where the Fed lowers rates but signals continued vigilance, could lead to increased market volatility as expectations shift.

Investors are now watching closely for signs of disinflation, particularly in the services sector. While headline inflation appears to be stabilizing, the core data suggests that the path to a sustainable easing cycle remains uncertain. Without a meaningful slowdown in core inflation, the Fed may be forced to extend its current policy stance, prolonging the wait for rate cuts and adding more uncertainty to the economic outlook [1].

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[1] title: CPI holds steady at 2.7%, but core price rise tests Fed ... (url: https://crypto.news/cpi-holds-steady-at-2-7-but-core-price-rise-tests-fed-patience-on-cuts/)

[2] title: Week Ahead: Firm U.S. CPI Won't Deter September Fed ... (url: https://seekingalpha.com/article/4811891-week-ahead-firm-us-cpi-wont-deter-september-fed-rate-cut)