#USJulyCPIInLine July U.S. CPI delivered almost exactly what markets were expecting.
Headline inflation came in at 3.4% YoY, while core CPI eased to 2.5% YoY. On a monthly basis, headline CPI increased just 0.1%, with core CPI rising 0.2%.
The immediate market reaction was constructive: stocks moved higher, Treasury yields eased, and risk sentiment improved as the report reduced pressure for an immediate Fed rate hike.
The bigger story is the September Fed decision.
Following the CPI release, CME FedWatch pricing showed the probability of a September 25-basis-point hike falling to around 42%,