BNP Paribas has shared its expectations for the U.S. Consumer Price Index (CPI) print for July, highlighting the following key points:

1. Monthly Expectation: Both headline and core CPI are expected to print at 0.2% month-over-month (m/m) in July, unchanged from June.

2. Yearly Rate: Year-over-year (y/y), the headline rate is expected to rise to 3.1% from 3.0%, while the core rate is anticipated to decline to 4.6% from 4.8%.

3. Goods Prices & Used Vehicles: An anticipated contraction in goods prices, particularly led by used vehicles, should slightly reduce the m/m core reading. Despite likely declines in used vehicle prices in the next few months, tight inventories may prevent a full return to pre-pandemic levels.

4. Gasoline Prices: A late-month jump in gasoline prices might not impact July's CPI but could add 35 basis points to the m/m headline CPI in August if current levels are maintained. The initial pass-through to core inflation may be limited, but long-term inflation expectations could be affected.

5. Fed's Response: The July CPI report is the second-to-last before the September FOMC meeting. Though BNP Paribas expects the August headline reading to climb due to higher gasoline prices, the milder trend in core inflation will likely enable the Fed to keep rates steady.

Conclusion: BNP Paribas' forecast for July's CPI print points to stability in the month-over-month rate and slight changes in the year-over-year figures. They also identify specific factors, such as used vehicle and gasoline prices, that might influence these readings. Their analysis concludes with a view on the Federal Reserve's likely response, underscoring the relevance of the CPI data to monetary policy.