Timiraos: July CPI eases pressure for next Fed hike, but hawkish voices remain

Nick Timiraos, often described as the Fed whisperer, said the July inflation report matched market expectations, easing some pressure on the Federal Reserve to deliver another rate hike next month, while hawkish voices remain. He said Wall Street paid particular attention to the consumer price index released today because Fed officials have signaled they are also watching the data more closely. According to Timiraos, Fed officials had spent the past year expecting inflation to return to the 2% target without additional rate hikes, but some now favor keeping rates higher for longer. He added that other officials have signaled they could join that hawkish minority if upcoming data make the current outlook harder to maintain. Timiraos said that earlier view was based on the belief that current rates were already restrictive enough and that persistently high inflation reflected external shocks rather than overly loose monetary policy. He added that there had also been an earlier expectation that tariff-driven cost increases would be one-off and that energy prices would fall alongside oil prices as Middle East tensions eased, but those shocks have instead persisted and, together with a surge in demand tied to the AI infrastructure investment boom, have pushed up prices for tech equipment and software.