According to data released by the Labor Department on Tuesday, US CPI rose 0.3% higher in July after rising 0.1% higher in the previous two months. Over the past year till July 2019, CPI had grown by 1.8%, compared to 1.6% in June, beating expectations for a 1.7% rise YoY.

Core CPI, excluding high volatility components like food and energy costs, have also risen 0.3% higher in July vs. +0.3% in June. It was for the first time since 2001 that core CPI has climbed higher for two consecutive months. On an annualized basis, core CPI has risen 2.2% YoY vs. +2.1% in June.

Although CPI edged closer to Fed’s 2% target for inflation, the ongoing trade tensions between the US and China continue to support market expectations for an additional 0.25% rate cut by the Fed in September.

Core inflation in the US has grown to 2.8%, the highest reading in eight years while the core PCE index climbed 1.6% higher YoY in June. The core PCE index is keenly watched by the Fed when setting inflationary targets for the US economy.