The US July CPI will be announced tonight! The impact of tariffs is becoming more apparent, and inflation may accelerate year-on-year

According to Zhitong Finance APP, the Consumer Price Index (CPI) for July in the United States will be released at 20:30 Beijing time on Tuesday, with investors closely monitoring the impact of President Trump's tariff policies on consumer costs. The market expects the U.S. July CPI to rise by 2.8% year-on-year, an increase from 2.7% in June. Driven by falling gasoline prices and a slight easing in food inflation expectations, the U.S. July CPI is expected to rise by 0.2% month-on-month, a slight slowdown from June's 0.3% increase.

The market also expects the core CPI, excluding volatile food and energy prices, to rise from 2.9% in June to 3.0% in July, indicating that the rise in goods inflation is no longer offset by easing service inflation.

The core CPI for July is also expected to rise by 0.3% month-on-month, exceeding June's 0.2% increase, marking the strongest increase in six months.

The CPI remains above the Federal Reserve's target level of 2%.

In June, signs of cost pressure driven by tariffs began to emerge, with clothing prices rising by 0.4% month-on-month and shoe prices increasing by 0.7% after several months of decline. Prices for furniture and bedding also rose by 0.4%, reversing a 0.8% decline in May, further indicating that rising costs are beginning to be passed on to consumers.

Wells Fargo economist Sarah House stated last week, "The July CPI will further show signs of price increases driven by tariff hikes. The price adjustment process is still in its early stages, and it remains unclear how higher import taxes will ultimately be distributed among end consumers, U.S. sellers, and foreign exporters."

House added, "Meanwhile, the growing consumer fatigue makes widespread price increases more difficult. We continue to expect inflation to rebound in the second half of the year, but not significantly, with core CPI and the core Personal Consumption Expenditures (PCE) price index expected to rebound to around 3% in the fourth quarter."

As the CPI is released on Tuesday, U.S. trade policies continue to evolve, which may further affect the actual tariff rates in the U.S. According to the latest estimates from Yale University's Budget Lab, the current effective tariff rate in the U.S. hovers around 18.6%, the highest level since 1933.

Nevertheless, the market increasingly leans towards the belief that the Federal Reserve will lower interest rates at the September meeting, primarily due to concerns about the U.S. labor market and ongoing inflation issues.

Citigroup analyst Stuart Kaiser stated, "The CPI may present a dual dilemma for the Federal Reserve," adding that investors may pay more attention to the latest data on core commodity prices.

Kaiser noted, "Last month, the rate of goods inflation rose slightly, which may be a point of concern in future reports as tariff policies are gradually implemented. In July, two members of the Federal Open Market Committee opposed keeping interest rates unchanged, and there is some uncertainty about future trends (especially in the context of rising inflation), but the trend for policy rates is clearly downward." The "FedWatch" tool from the Chicago Mercantile Exchange shows that as of Tuesday afternoon, investors expect an 87% chance of the Federal Reserve cutting interest rates by 25 basis points in September, compared to a 57% chance last month