US inflation likely rose moderately in July as gasoline prices fell

US inflation is expected to have increased slightly in July, according to the Labor Department's Consumer Price Index report. This rise could influence financial markets and potentially lead to the Federal Reserve delaying interest rate hikes in 2023. The report comes after recent job losses were announced, and economists believe that the US's status as a net oil exporter and decreasing petroleum reserves helped mitigate the impact of rising oil prices from the Middle East conflict.

However, inflation risks are still viewed as being biased towards the higher side. President Trump has accused Iran of being "devious negotiators" and has outlined various options for dealing with the Iran situation, ranging from limited action to a more aggressive approach. The Federal Reserve is expected to maintain a cautious stance, with no significant changes to interest rates unless the data indicates significant problems with unemployment or the Consumer Price Index (CPI).

The CPI is forecasted to increase by 0.1% in July, following a decline of 0.4% in June, marking the first decrease in six years. Year-over-year, the CPI is expected to rise by 3.4% in July, up from 3.5% in the previous month. The moderate rise in the CPI is primarily attributed to a drop in gasoline prices, which averaged $4.064 per gallon in July, down from $4.184 in June.

Food prices are also expected to increase marginally, in line with their overall trend. Other factors such as household furniture, apparel, and the fading effects of tariffs are anticipated to contribute to the moderate rise in the CPI. The core CPI, which excludes volatile energy and food components, is expected to rise by 0.2% in July, with a year-over-year increase of 2.5%.

While a lower-than-expected CPI report could ease pressure on the Federal Reserve to raise interest rates, it is still regarded as high and problematic for consumers. The high cost of living has negatively impacted public opinion of Trump, potentially affecting the Republican party's chances in the upcoming midterm elections.