CPI month-over-month from the BLS, chart by Mish

The CPI Rose 0.2 Percent in July

The BLS reports the CPI Rose 0.2 Percent in July, in line with the the Bloomberg Econoday consensus. Good and bad details are very mixed.

The BLS reports to a single decimal place. I calculate two decimal places.

CPI Month-Over-Month Percent Details

• All Items: 0.20
• All Items Except food and Energy: 0.32
• Food and Beverage: 0.05
• Food Away from Home: 0.28
• Food at Home: -0.12
• Shelter: 0.23
• Owners’ Equivalent Rent (OER): 0.28
• Rent of Primary Residence: 0.26
• Medical Care Services: 0.79
• Medical Care Commodities: 0.05
• Energy: -1.07
• Gasoline: -2.17

The Fed, when it looks at the CPI, looks at core CPI, all items except food and energy. That was a less than stellar 0.32 percent increase for the month.

But the Fed’s preferred ,measure of inflation is the PCE price index, out later this month.

The PCE overweighs medical care whereas the CPI overweighs shelter. Medical Care Services is a very hot 0.79 percent.

On this basis, I doubt the next PCE report will be any good.

I will cover food, in a second post.

For now, please make a mental note that food and beverage up 0.05 percent for July is weighted nonsense even if you believe food at home declined 0.12 percent.

CPI Year-Over-Year Percent Change
 

CPI year-over-year from the BLS, chart by Mish
 

CPI Year-Over-Year Details

• All Items: 2.7
• All Items Except food and Energy: 3.1
• Food and Beverage: 2.8
• Food Away from Home: 3.9
• Food at Home: 2.2
• Shelter: 3.7
• Owners’ Equivalent Rent (OER): 4.1
• Rent of Primary Residence: 3.5
• Medical Care Services: 4.3
• Medical Care Commodities: 0.10

Problems for the Fed

The CPI year-over-year CPI was 2.4 percent in September of 2024, then 2.3 percent in April of 2025 but has generally been stubborn.

More importantly, year-over-year core CPI is up 0.2 percentage points in July to 3.1 percent.

That more than a full percentage point higher than the Fed wants to see. It was also higher than the Bloomberg consensus estimate of 3.0 percent for July.

Core CPI bottomed at 2.8 percent in April.

CPI Year-Over-Year Percent Change Medical Care
 

CPI year-over-year medical care from the BLS, chart by Mish
 

Medical Care is a big problem for the Fed. And It’s not one the Fed can do anything about (other than ignore it).

The BLS weighs medical care services at 6.750 percent of the CPI. Medical Care Commodities has a weight of 1.513 percent.

Thus medical care services is nearly 4.5 times as important as medical care commodities.

Month-over-month medical care services was up a whopping 0.79 percent. That is going to impact the PCE price index which overweighs medical care.

And the PCE price index is the Fed’s preferred measure of inflation.

The Stock Market vs the Bond Market Reaction

The major stock market indexes are up about 1 percent on this news as I type (10:50 AM Mountain).

The 30-year long bond yield is up 4 basis points to 4.883 percent.

The long bond thought thought as much of this report as I did, which is mediocre at best, and that’s a stretch.

CPI Totally Messed Up

The CPI is totally messed up as a measure of inflation.

I discussed very serious errors in Is Homeowners Insurance Understated in the CPI? Shop Around!

Please check that out. And later today I will prove the BLS food weights are total nonsense.

Stay tuned.

More By This Author:

Over Half The US Has Major Stress Over The Price Of Food
Trump Imposes Export Taxes On NVDIA And AMD, Unwise And Unconstitutional
Is Homeowners Insurance Understated In The CPI? Shop Around!