Aug 14 Reuters U.S. consumer prices rebounded as expected in July, but the trend remained consistent with subsiding inflation and did not change expectations that the Federal Reserve will cut interest rates next month.

The consumer price index increased 0.2 last month after falling 0.1 in June, the Labor Department said on Wednesday. In the 12 months through July, the CPI increased 2.9 after advancing 3.0 in June.

Economists polled by Reuters had forecast the CPI increasing 0.2 on the month and rising 3.0 yearonyear. The government on Tuesday reported a mild increase in producer prices in July.

The odds of a rate cut at the Fed39;s Sept. 1718 policy meeting are nearly split between half a percentage point and 25 basis points. On Wednesday futures moved slightly in favor of a 25 bp cut, with odds at 60.5 according to LSEG calculations.

MARKET REACTION

STOCKS U.S. stock index futures extended a slight gain to 0.07 pointing to a steady open on Wall Street BONDS The 10year U.S. Treasury yield rose to 3.858 and the twoyear yield rose to 3.977 FOREX The dollar index pared early slippage to 0.068 and the euro pared its early rise to 0.2

COMMENTS

TOM GRAFF, CIO, FACET, PHOENIX, MARYLAND

CPI came in largely inline with expectations. The monthly Core figure was 0.2, exactly as expected. The details were slightly more favorable than that though. Almost all of the increase for the month came from shelter. Since this has a somewhat lower weighting in Core PCE, this implies…