July CPI is expected to slightly decline, with Citigroup and Bank of America having differing views on the prospects for a rate hike in September

Economists surveyed by Reuters expect that the overall CPI year-on-year in the U.S. for July will drop from 3.5% in June to 3.4%; the core CPI year-on-year is expected to decrease from 2.6% last month to 2.5%. Economists at Citigroup believe that, as expected, if there is a second consecutive month of soft inflation readings, it would indicate that more than one month of data points to easing inflation pressures, which would essentially rule out the possibility of a rate hike in September. However, economists also expect that core service sector inflation will rise slightly in July, with prices increasing by 0.3% month-on-month.

Previously, the data remained flat from May to June. Analysts at Bank of America stated that a rebound in core service sector indicators could keep the September rate hike on the table. Analyst Kate Duguid noted that if the latter view prevails and inflation data comes in below expectations, then the Federal Reserve's rate hike could be delayed until December or later.