US inflation outlook raises questions on September rate decision

The Federal Reserve’s July meeting ended with a hold on interest rates, but the vote wasn’t exactly a portrait of consensus. The 9-3 split, with three members pushing for an immediate 25-basis-point increase, tells you everything about where the inflation debate stands heading into fall. The federal funds rate remains parked at 3.5%-3.75%, where it’s been since the last adjustment. But with the next FOMC meeting set for September 15-16 and a critical CPI print expected around August 12, the window for clarity is narrow and the stakes are high. The inflation picture: better, but not good enough June’s Consumer Price Index offered something for both hawks and doves to latch onto. On a month-over-month basis, CPI actually fell 0.4%, a welcome reprieve after months of sticky readings. But zoom out and the picture looks less comfortable. Year-over-year inflation clocked in at 3.5%, down from 4.2% in May but still well above the Fed’s 2% target. Core CPI, which strips out volatile food and energy components, sat at 2.6% annually. Energy prices have been the main driver of the headline improvement. After spiking earlier in 2026, fuel costs have retreated from their peaks, pulling the broa...