Wednesday's CPI report could reshape the Fed's rate path — here's what advisors should watch

This week's July CPI report could be the tiebreaker for the Federal Reserve's next move — a decision advisors have been watching closely since last week's weak jobs data raised the stakes.

CPI is an important measure for inflation, and the latest numbers, which will be released Wednesday, come hot on the heels of Friday's weak jobs report that was seen as likely keeping the Fed on hold.

Economists surveyed by Dow Jones Newswires and the Wall Street Journal are looking for July CPI to increase 3.4% over the 12 months leading up that point, down slightly 3.5% in June’s report. July’s core CPI, or the index for all items less food and energy, is expected to be 2.5% over the year, compared with 2.6% in June.

A low July CPI report this week could make the Fed delay rate hikes, according to Thierry Wizman, global FX & rates strategist at Macquarie Group, in a note Monday. “We would note that even a low CPI print (say, where core declines to 2.4-2.5% in July, from 2.6% in June), might not be enough to negate the concerns of the Fed's hawks, which seem to focus on the durability of above-target inflation for the past four years,” he wrote. “But could the data push the FOMC to delay the rate hike to December? Yes, it could.”

The reasons for a December hike are that the Fed will be issuing a new dot plot and Summary of Economic Projections (SEP) in December, making the December meeting a focal point for the Fed to change its policy, Wizman added.

Last month, in its second meeting with Kevin Warsh as chair, the Federal Reserve kept interest rates steady despite dissenting FOMC voices. The decision marked the fifth consecutive meeting with no change since the Federal Reserve made its last rate cut in December 2025.

Bob Edwards, chief investment officer at Edwards Asset Management is also keeping a close eye on CPI. “Wednesday's CPI is the next key economic data point that will be more closely watched given Friday's negative jobs number,” he wrote, in a note, adding that Core CPI will likely be 2.5%. “The prevailing narrative is that inflation remains damningly high, but 2.5% is not that far from the Fed's 2% goal. It is not victory, but it is progress. A benign CPI report and no September rate hike would give this market permission to run faster.”  

On Monday afternoon the CME’s FedWatch tool puts the probability of rates being unchanged at 50.3% for September’s meeting, while a hike to between 3.75% and 4% has a likelihood of 49.7%. However, the tool, which updates in realtime, had just an 18.6% probability of an unchanged rate for the Fed’s December meeting, and the likelihood of a hike to between 3.75% and 4% is 43.2%. The possibility of an increase to between 4 and 4.25% at the December meeting is 31.3% and the likelihood of an increase to between 4.25% and 5% is 6.8%.

For advisors, the more useful signal may not be Wednesday's print itself but what it does to expectations heading into the end of this year. With FedWatch pricing show a near coin-flip for September but a much wider spread of outcomes by December, this week's client conversations may be better spent framing rate uncertainty as a multi-meeting story — and stress-testing portfolios against a range of scenarios — rather than treating one data point as a verdict.