The latest inflation data has taken the wind out of the sails of Federal Reserve hawks, according to a new analysis from Breitbart Business Digest. Wednesday’s consumer price index report showed a mere 0.1% increase in July from June, following a 0.4% decline the prior month. While the year-over-year CPI remains elevated at 3.4%, this marks the second consecutive month of deceleration, and the three-month annualized rate has fallen to just 0.5%.
That trend suggests the economy is currently running below the Fed’s 2% target for the personal consumption expenditures (PCE) price index, even though PCE has been running hotter than CPI recently. Core CPI, which strips out volatile food and energy prices, rose 0.2% in July and is up 2.4% from a year ago. On a three-month annualized basis, core CPI is now 1.6%.
According to the Breitbart analysis, headline CPI on a three-month annualized basis is at its lowest level since June 2020, when prices were actually falling due to pandemic lockdowns. Core CPI’s three-month annualized rate is the lowest since July 2024, just before the Fed began its current easing cycle.
The report also highlighted alternative inflation measures. The Cleveland Fed’s median CPI rose 0.3% in July, with a year-over-year rate of 2.7% and a three-month annualized rate of 3%—a bit high but not alarming. The Cleveland Fed’s 16% trimmed mean measure came in at 0.2% for the month and 2.6% for the year, with a three-month annualized figure of 2%. These, the analysis argues, indicate underlying inflation is not threatening to push prices off target.
Labor Market and Business Inflation Expectations Point to Calm
The labor market data also weigh against a rate hike. Average hourly wages rose just 0.05% in July, and the three-month annualized pace is 2.3%, consistent with meeting—or even undershooting—the Fed’s inflation target. The recent decline in payrolls also suggests little inflationary pressure from the labor market.
Business inflation expectations remain mild. The Atlanta Fed’s measure shows unit costs are expected to rise 2.2% over the next year. While that’s above the pre-pandemic average, the analysis notes that in the pre-pandemic era, the Fed was regularly undershooting its target, so the current figure is acceptable.
The Breitbart piece argues that the arguments of hawkish Fed presidents appear increasingly misplaced. The core concern has been that repeated “one-off” supply shocks to headline inflation could disrupt inflation expectations. But so far, that fear hasn’t materialized. The median expected inflation rate over the next five years is 3%, historically consistent with the Fed’s target. The Cleveland Fed’s measure of expected inflation over the next five years—based on surveys, Treasury yields, and TIPS prices—stands at 2.4%.
Hawkish Fed President’s Claims Contradicted by Her Own Examples
Beth Hammack, President of the Cleveland Fed and a proponent of a rate hike at the last meeting, recently took to LinkedIn to voice her concerns about inflation in her district. She argued that “there’s no tension in the mandate,” that policy isn’t restrictive, and that delaying action to bring inflation back to 2% would make it more challenging and costly for Americans.
Hammack cited specific examples of Fourth District residents struggling with elevated prices: a Sandusky, Ohio restaurant owner who had to drop his building insurance after premiums tripled in three years; a mid-sized Wooster, Ohio manufacturer unable to raise prices despite soaring input costs; and an Erie, Pennsylvania worker who can’t afford ice cream for his kids.
But the Breitbart analysis suggests these examples are actually signs of disinflation, not inflation. A restaurant owner dropping insurance indicates his income can’t support current prices. The manufacturer’s inability to pass on input costs suggests demand is insufficient to support higher prices. And the worker who can’t buy ice cream? That, too, reflects disinflation rather than inflation.
The piece emphasizes that the Fed’s inflation target is focused solely on consumer-facing inflation, as measured by the PCE price index. Even alternative measures considered by some Fed officials are consumer-based. The Fed could target business inflation, looking at input costs, but it doesn’t. What matters for policy is consumer inflation.
Outlook: Rates Likely Unchanged in September
There will be one more CPI report and a single PCE price index release before the Fed’s next meeting in September. To justify a rate hike, those reports would need to show a large jump in inflation—an outcome the analysis calls improbable given the recent softness in jobs and wages.
As a result, the Breitbart Business Digest concludes that the Fed will most likely keep rates unchanged when it meets next. The mild July inflation report, combined with cooling labor market indicators and stable inflation expectations, makes a strong case for the central bank to hold its course.
Source: www.breitbart.com — https://www.breitbart.com/economy/2026/08/12/breitbart-business-digest-julys-mild-inflation-report-should-keep-the-fed-on-hold/