The US CPI inflation dropped to 8.5% in July for the first time since April 2022. It was expected to fall from 9.1% to 8.7%, but easing gas prices in the past month ensured an even bigger drop.

The core CPI, which excludes highly volatile food and energy costs from the index, rose 0.3% and stayed stable at 5.9% year on year.

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The inflation figure comes after an unexpected increase in the July labour market report allayed fears of a U.S. recession. The robust jobs data supported the Fed’s case that its present interest rate path will protect the world’s largest economy from expanding at an unsustainable pace.

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Though there are indicators that inflation could reduce in the next months, it will almost certainly remain considerably above the Federal Reserve’s 2% annual target long into next year, if not 2024.

Chair Jerome Powell has stated that the Fed will consider delaying rate rises if monthly core inflation figures continue to fall. The Fed has lifted its benchmark short-term interest rate four times in the last four rate-setting sessions, including a three-quarter point rise in both June and July – the first such hikes since 1994.

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Stock futures in the United States rose after the release of July inflation data, which indicated that price pressures were receding by a larger margin than economists had forecasted.

S&P 500 futures were up 66 points, or 1.6%, to 4,188, while Dow Jones Industrial Average futures were up 407 points, or 1.2%, to 33,144. Futures for the Nasdaq 100 rose 304 points, or 2.4%, to 13,340. 

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The report also caused a decline in Treasury rates, with the 2-year yield falling 18 points to 3.075, and the 10-year yield falling 10 points to 2.695. The ICE U.S. Dollar Index was down 0.4% after the data, while gold prices were also down 0.3%.

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The ICE US Dollar Index fell 0.4%, while gold prices on the Comex Futures have risen sharply as a result of the CPI report. The December gold futures price is quoted at US$ 1,819.60/oz, up 0.40%.