Core inflation rose 0.2% m/m in July, which equates to two percent on an annualized basis. Importantly, two percent core inflation is right in-line with the Fed’s longer run mandate. It also represents a notable cooling relative to the past year, over which core inflation rose 3.2%. We persist with our view that Opportunity Knocks for patient long-term investors, particularly in private markets. Inflation is cooling slowly, but enough to allow the Fed to initiate a gradual series of cuts starting in September that we think will take policy rates towards long-run neutral levels (low-three percent range) over the next year. Importantly, we see notable tailwinds persisting in areas including productivity, consumer wealth, and AI-related investment. The S&P 500 may continue to chop as it digests elevated valuations and good-not-great earnings trends. That said, other areas of the market across smaller and private company valuations, credit, infrastructure, and real estate look much more attractive from a valuation perspective. Furthermore, a cutting cycle should help spur capital markets activity, and over time, revive sentiment in the more rate-sensitive areas of the economy and markets.
U.S. Core Inflation Continued to Moderate in July, Led by Goods Deflation
July U.S. Core CPI Detail
![Bar chart showing U.S. inflation on goods and services in July 2024.](/insights/flash-macro-cpi-update-july-2024/_jcr_content/root/main-wrapper/article-wrapper/grid_container/grid/responsivegrid/image.coreimg.82{.width}.png/1723661407850/kkr-flashmacro-2024-august-cpi.png)