However, I wouldn't describe today as putting the inflation concerns to bed.

The July inflation report didn't offer much relief. Core prices are still climbing, and it comes right on the heels of softer jobs data. That combo now raises the stakes for the next Fed meeting. Let's start where the heat showed up, Marta. I'm curious what stood out to you most in today's print.

Well, numbers were right on target with headline inflation moving up point two, core inflation moving up point three. We did have some relief from energy prices. And broadly speaking, shelter drove much of the index, though its contribution continues to fall relative to prior years. Core goods is the key place everyone is watching. We did see some advances there, but not as much as in prior months.

Yeah. That's exactly where those tariff driven inflation numbers tend to show up first, Marta.

Core goods usually that first pressure point that we see in the data.

That's absolutely right. And what's interesting is that core goods have trended deflationary over time if you're looking at many years. That changed during the pandemic era, and then we saw the trend return in twenty twenty four. But starting in April of this year, we've seen core goods increasingly contribute to inflation. This month, the Bureau of Labor Statistics calls out household furnishings and used cars and trucks in particular.

Still, as I noted, the climb wasn't as steep as in prior months. Interestingly, commentary around this report has focused more on services, which showed perhaps warmer inflation than anticipated.

Samurta, we had inflation come in right at expectations.

We're starting to see signs that tariffs are pushing prices higher. But despite all of this, the market is rallying. So what's driving this, do you think?

Well, the reaction today suggests that despite stated expectations, markets were fearful the report could actually be worse, particularly in core goods. So perhaps it's a question of actual results versus those whisper numbers.

So let's zoom out. We've got warm CPI, soft jobs. It's a bit of a push pull. So how does this change the outlook for the Fed?

We're still a ways off from the Fed meeting and lots of time for lots of things to happen. But at least as of today, the market seems increasingly confident of a cut in September. That's likely because of the jobs restatements that we saw with last week's payrolls significantly worsening while the inflation view still seems relatively consistent to expectations. However, I wouldn't describe today as putting the inflation concerns to bed.

So with inflation still running a bit hot and the job market cooling, is this starting to look like stagflation, or do you think that's a bit of a stretch?

I think when most of us think of stagflation, we call to mind the nineteen seventies and the nineteen eighties, and I don't think that is what we are looking at. But it is true that we are seeing growth moderate while inflation sticks around, and there's the AI effect to contend with, which is a potential growth accelerant, though it does have its downsides, particularly for segments of the labor market.

There are so many moving variables that increasingly we are thinking of the economy not as bifurcated, but really as splintering.

Yeah. Great perspective as always, Marta. Thank you so much. Today's data really keeps the pressure on the Fed. We'll keep watching all the numbers and be back with Marta's analysis. Have a great rest of your week.