U.S. stocks, dollar steady after July CPI matches forecasts

U.S. equity benchmarks and the dollar held steady on Wednesday after the Labor Department reported that consumer prices rose 3.2% in July from a year earlier, matching consensus forecasts.

The core consumer price index, which excludes volatile food and energy costs, increased 4.7% year-over-year, also in line with expectations. On a monthly basis, both the headline and core CPI rose 0.2%, the smallest gains since February.

Energy prices declined 1.4% in July, while shelter costs, a key component of the index, moderated to a 0.4% monthly increase from 0.5% in June. Food prices were unchanged for the month. The data suggests inflationary pressures are easing gradually, though remaining above the Federal Reserve’s 2% target.

Following the release, the S&P 500 futures were up 0.3%, while the Dow Jones Industrial Average futures gained 0.2%. The Nasdaq 100 futures rose 0.4%. The U.S. dollar index, which tracks the greenback against a basket of major currencies, was little changed at 102.85, having pared earlier losses.

Market reaction indicated that investors viewed the report as consistent with expectations, with no immediate shift in expectations for the Federal Reserve’s policy path. Traders maintained bets that the central bank would hold interest rates steady at its next meeting in September, with a roughly 90% probability of no change, according to CME Group’s FedWatch tool.

The July CPI data follows a string of softer-than-expected inflation readings in recent months, which have supported hopes that the Fed may be nearing the end of its tightening cycle. However, policymakers have emphasized the need for sustained progress before declaring victory on inflation.

The report comes ahead of a busy week for economic data, including retail sales and industrial production figures due later this week, which will further inform the outlook for monetary policy.