US markets opened flat on Tuesday after July’s core Consumer Price Index posted its sharpest rise in six months. In the early hours of trading, the Dow Jones Industrial Average gained 179 points (0.41%) to 44,154, the S&P 500 advanced 28 points (0.39%) to 6,397, and the Nasdaq rose 60 points (0.25%) to 21,441.31.
Data from the US Bureau of Labor Statistics showed the CPI climbed to 323.05 points in July from 322.56 in June 2025. The annual inflation rate held steady at 2.7% for the second month in a row, coming in below market expectations of 2.8%. On a monthly basis, CPI rose 0.2%, down from June’s 0.3% increase, the strongest since January, and in line with forecasts.
Shelter costs, up 0.2%, remained the largest contributor to the monthly rise. Core inflation, which excludes food and energy prices, accelerated to 3.1% in July from 2.9% in June, surpassing estimates of 3%. Monthly core CPI rose 0.3%, its largest increase since January, after a 0.2% gain in the prior month.
Markets had anticipated a 0.2% monthly rise in US July inflation and a 2.8% annual increase, with core inflation (excluding energy) expected to climb 0.3% month-on-month and 3.0% year-on-year.
However, the Labor Department reported payroll growth of just 73,000 in July, falling short of the 100,000 forecast, and bringing the three-month average to only 35,000, a sign of deeper weakness in the labor market.
This slowdown raises the likelihood of the Federal Reserve moving towards rate cuts to support its dual mandate of maintaining full employment and fostering economic growth.
Since December, the US Federal Reserve has kept interest rates unchanged. While President Trump argues that the central bank is already behind in cutting rates, Fed Chair Jerome Powell remains cautious, opting to wait until the effects of pricing tariffs become clearer before considering a rate reduction.