July Inflation Softens; Fed Path and Geopolitics in Focus

U.S. inflation metrics showed further softening in July, with PPI flat month over month at 4.7% year over year and core PPI at 4.2%, while CPI measures suggest disinflation spreading. The mixed readings keep the Federal Reserve's September decision in play, with policymakers weighing whether to hold or raise amid cooling input costs but ongoing energy-driven volatility. Energy price volatility and potential pass-through to wages and services inflation leave room for cautious, data-dependent policy moves, with some analysts suggesting a hold through 2026. Oxford Economics projects July PCE inflation at 3.6%, supporting a steadier policy stance given still-elevated overall inflation and market adjustments for gold and other assets. Beyond the U.S., inflation dynamics are uneven globally, with Serbia’s July inflation at 1.9% as energy components remain a driver, while geopolitical events and oil volatility keep markets sensitive to energy prices and currency moves, including the U.S.–Iran dynamic.