MARKET NEWS

NEW YORK (Reuters) -U.S. consumer prices increased moderately in July, largely in line with expectations, though rising costs for goods because of import tariffs led to a measure of underlying inflation posting its largest gain in six months.

The consumer price index rose 0.2% last month after gaining 0.3% in June, data showed. In the 12 months through July, the CPI advanced 2.7% after rising 2.7% in June. Economists polled by Reuters had forecast the CPI rising 0.2% and increasing 2.8% year-on-year.

Excluding the volatile food and energy components, the CPI rose 0.3%, the biggest gain since January, after climbing 0.2% in June. The so-called core CPI increased 3.1% year-on-year in July after advancing 2.9% in June.

COMMENTS:

TOM PORCELLI, CHIEF US ECONOMIST, PGIM, NEW JERSEY:

"This is one of these better-than-feared outcomes. People are probably going to use this as a sign that the Fed could cut rates in September. And I don't doubt for a second that that's exactly how the market is going to react. The only thing I would caution, though is, it's going to take time for these tariffs to really show up in earnest."

"I think people that anyone waiting for this to show up in sort of one big move higher in any given month, that's not how it's going to be. It's going to sort of trickle in. The real peak inflation is not today. Peak inflation on the back of tariffs is actually months from now. And inventories in particular have really allowed companies to sort of mitigate some of the initial tariff thrust. So yes, we believe that the Fed is supposed to cut in September. It's been our long-standing call."

ADAM SARHAN, CHIEF EXECUTIVE, 50 PARK INVESTMENTS, NEW YORK:

"Inflation is moving closer to the Fed's target of 2% and that is a bullish thing because the lower inflation gets, the greater the chances are the Fed will cut rates. If you look at the data, the jobs report was weaker than expected and inflation was weaker than expected. That increases the odds the Fed will cut rates.'

"The economy is in a good place because inflation's coming down and that's exactly what both Trump and the Fed want...By the end of the year, I'd expect 50 basis points cut. If they cut more, that means the data would have to continue to weaken. If we get more weaker than expected jobs reports, then the Fed's going to cut more aggressively. But if the economy stays as is and inflation continues to come down, then that'll open the door for the Fed to cut."

GUY LEBAS, CHIEF FIXED INCOME STRATEGIST, JANNEY MONTGOMERY SCOTT, PHILADELPHIA:

"The July CPI was roughly in line with expectations and did not include very much tariff pass-through to consumer prices and is certainly good enough to lock in the odds of a September rate cut. There's more road between here and the 17th of next month, but at least as far as inflation data goes, this is pretty unconcerning."