The July 2025 Consumer Price Index of All Urban Consumers (CPI-U) report indicates that inflation increased by 0.2% for the month, slightly below the 0.3% rise in June. These data were released at 8:30 am EST on August 12, 2025, by the Bureau of Labor Statistics. Before seasonal adjustment, the year-over-year (Y-o-Y) inflation rate in the all-items index grew by 2.7%, matching the figure from June.
The mixed results aligned near economists’ consensus estimates. The table below is courtesy of Investing.com. The left column represents July’s figures, while the right column represents forecasters’ expectations. As you can see, core inflation outperformed, while headline inflation underperformed.
After the latest FOMC meeting on Jul. 30, Chairman Jerome Powell said during his press conference:
“Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen. A reasonable base case is that the effects on inflation could be short-lived, reflecting a one-time shift in the price level. But it is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed and managed.”
Thus, with today’s inflation results doing little to alleviate those concerns, more data will likely be needed before the FOMC feels comfortable cutting rates.
Transportation and medical care services were noticeable outliers in July, with each rising by 0.8% MoM, while fuel oil jumped by 1.8% MoM despite overall energy prices declining by 1.1% MoM. Core inflation (which excludes the impacts of food and energy), rose by 0.3% in July, up from 0.2% in June and 0.1% in May.
Food Prices
The food index was flat in July after rising by 0.3% MoM in June and May. Two of the six major grocery store food indexes increased, one was flat, and the other three realized deflation:
- Cereals and bakery products (-0.2%)
- Meats, poultry, fish, and eggs (+0.2%)
- Dairy and related products (+0.7%)
- Fruits and vegetables (+0.0%)
- Nonalcoholic beverages (-0.5%)
- Other food at home (-0.5%)
Maintaining its momentum, the food away from home index rose by 0.3%, as restaurant prices continue to outperform grocery store products.
Energy Prices
The energy index decreased by 1.1% in July after rising by 0.9% in June. Gasoline prices fell by 2.2%, natural gas by 0.9%, and electricity by 0.1%.
Core CPI
The July core CPI rose by 0.3% month-over-month and 3.1% Y-o-Y. Below is an itemized breakdown of the main price fluctuations seen in the core CPI reading:
- Shelter index: (+0.2%) [June: +0.2%]
- Rent index: (+0.3%) [June: +0.2%]
- Owners’ equivalent rent: (+0.3%) [June: +0.3%]
- Motor vehicle insurance: (+0.1%) [June: +0.1%]
- Medical care services: (+0.8%) [June: +0.6%]
- Physician services: (+0.2%) [June: +0.2%]
- Hospital services: (+0.5%) [June: +0.7%]
- Airline fares: (+4.0%) [June: -0.1%]
Seasonally Unadjusted CPI
Before seasonal adjustments, the CPI-U for July 2025 increased by 2.7% Y-o-Y to an index level of 323.048. Since these figures are unadjusted, they include regular seasonal price fluctuations that can create volatility in the results.
Tough Job Ahead?
The on-again, off-again, relationship with rate cuts continues to play out, as surprising labor market revisions confirmed the lingering weakness present in private data sources.
For example, U.S. job openings have declined, and ADP recently reported a net loss in its monthly private payrolls. However, the data was largely ignored because U.S. nonfarm payrolls — sourced from the Bureau of Labor Statistics (BLS) — continued to show solid growth and healthy hiring. But, that all changed on Aug. 1. The report stated:
“Revisions for May and June were larger than normal. The change in total nonfarm payroll employment for May was revised down by 125,000, from +144,000 to +19,000, and the change for June was revised down by 133,000, from +147,000 to +14,000. With these revisions, employment in May and June combined is 258,000 lower than previously reported.”
Thus, while the unemployment rate held steady near 4.2%, the blue bars furthest to the right of the second chart below show how the pace of employment growth has declined significantly over the last few months.
Moreover, the massive downward revisions further complicate the FOMC’s already tough balancing act between taming inflation and maintaining maximum employment.
To that point, Indeed noted on Aug. 1 that the composition of hiring in July was equally troubling. An excerpt read:
“The sectoral breakdown from the jobs report is especially striking, with private education and health services adding 79,000 jobs, while other sectors, including professional and business services, manufacturing, and government, lost more than 10,000 jobs each. While the healthcare and social assistance sub-sector accounts for just 14.6% of total jobs in the economy, 48.8% of all employment growth in the US has occurred in this sub-sector over the past year….
“The increasing concentration of jobs in certain sectors and an outright contraction of jobs in many others does not bode well for the market going forward.”
So, while the FOMC’s latest Summary of Economic Projections has market participants expecting two rate cuts before the end of 2025, Vice Chair of Supervision, Michelle Bowman, advocated for three interest rate reductions on Aug. 9 to act as a hedge “against the risk of a further erosion in labor market conditions and a further weakening in economic activity.” Yet, other committee members prefer a wait-and-see approach, and there is plenty of division among the group.
All in all, there is so much volatility in the data that one month’s sunshine becomes next month’s storm. And with tariff uncertainty still lingering, FOMC members may struggle to form a clear consensus in the months ahead.
In contrast, the economic tension is bullish for gold, with the yellow metal hitting a new record high in August — surpassing $3,500 — and the long-term momentum remains intact.
To explain, Goldman Sachs still expects gold to hit $4,000 by mid-2026. The investment bank’s latest analysis (the dashed red line) is well ahead of what’s priced into the futures market (the dashed gray line), which means there’s still room for traders to shift their expectations upwards.
Are you thinking about diversifying into precious metals? Talk to your financial advisor about initiating a gold IRA account today, allowing you to invest in this red-hot asset on a tax-advantaged basis. Additionally, our complimentary CPI inflation calculator remains at your disposal, enabling you to assess inflation’s impact on your finances. Please seek the guidance of a financial advisor before making any investment decision.
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Alex Demolitor is a Canadian financial writer hailing from Halifax, NS. Alex has a Bachelors Degree from King’s College and passed the CFA Exam Level III. He specializes in fundamental analysis of the stock, bond, commodity, and FX markets. He also covers US & Canadian economic indicators.
