CPI: Further Cooling

Bottom Line: Consumer prices rose nearly as expected in July, with core and headline readings up less than 0.2% for the second consecutive month. The headline CPI edged up to 3.3% year-on-year, primarily due to less favorable base effects. But the trend remains towards cooling, with the last three months annualizing at just 1.9%, well below the year-on-year reading and even below the 2.6% annualized pace of the last six months. Core CPI year-on-year was down to 4.7%, annualizing at 3.1% in the last three months and 4.1% in the last six months, suggesting a continued cooling trend. Owner's Equivalent Rent (OER), the largest component of the core, was the biggest driver of the increase, up 0.5%, a touch hotter than in June. Services less rent, a favored indicator of Fed Chair Powell, continues to show disinflation, up just 0.6% annualized in the last six months. Finally, used car and truck prices were notably lower in July, as were airfares, which continued to decline sharply.Overall, this report continued slow but steady cooling in inflation pressures. The Federal Reserve will get one more report before their next FOMC meeting, but this one will at least relieve some of the concern that they might need to hike again.