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By Scott McIntyre
Co-Head of Investment Management
HilltopSecurities Asset Management
The consumer price index (CPI) for July was generally in-line with expectations, with a drop in gasoline and the first outright decline in grocery prices since March restraining headline inflation and sapping any urgency by hawkish Fed officials to raise rates in the coming months. Overall CPI rose just +0.1%, lowering the year-over-year pace from +3.5% to +3.4%.
Energy prices fell -1.5% in July with the price of gasoline tumbling -2.9% following a -9.7% drop in June. Energy costs are still nearly +15% higher than a year ago and remain a significant contributor to headline inflation but have moved lower in recent months.
Food prices rose by just +0.1%, with the food-at-home component (groceries) actually declining -0.1%, while food-away-from home rose +0.3%. Core CPI, which strips out the cost of both food and energy, climbed +0.2% in July, bringing the annual pace down from +2.6% to +2.5%, matching the lowest since March 2021.
Shelter costs, making up roughly a third of overall CPI and over 40% of the core, rose by just +0.1% for the second straight month. The housing price component, which peaked in March 2023 at an annual pace of +8.2%, has steadily declined over the past 40 months and is now at +3.2%.
New car prices rose +0.1% in July, up +0.5% year-over-year and essentially flat in 2026. Used car prices, on a steady decline for months, rose +0.4% in July while still down -1.9% over the past 12 months. Insurance costs, a major driver of higher post pandemic price pressure, continued to ease with both auto (-0.3%) and health (-0.2%) logging welcomed decreases. Lower insurance prices reflect easing auto and housing costs.
One source of upward pressure (which admittedly doesn’t affect most consumers) was computer software and accessories, which increased +1.5% month-over-month and a record +39.5% year-over-year. The Federal Reserve noted that some of the extraordinary increase may reflect measurement issues related to software pricing and quality adjustments, rather than broad-based consumer inflation pressure.
The takeaway this morning is that any urgency some Fed officials may have felt to increase the overnight target in the near-term is now on the backburner. The July inflation report was a relief. It doesn’t establish a trend as both the conflict in the Middle East and the tariff situation are fluid. However, the relatively cool report should push any policy move (up or down) past the election and into December.
About Scott McIntyre, CFA
As HilltopSecurities Asset Management’s Co-Head of Investment Management, Scott McIntyre specializes in investment management services and is responsible for the management, oversight and trade supervision of more than $30 billion in institutional fixed income assets for HilltopSecurities’ public sector municipal clients. Scott also provides investment advice and consulting, reviews local government investment policies, formulates overall investment strategies, evaluates account performance and oversees the day-to-day operations. He is a member of the Chartered Financial Analyst (CFA) Institute and a CFA Charterholder, a two-term advisor to the GFOA Treasury and Investment Management (TIM) committee, a Registered Investment Advisor, and holds FINRA Series 7, 24, 63, and 65 licenses.
About Greg Warner, CTP
As HilltopSecurities Asset Management’s Co-Head of Investment Management, Greg Warner specializes in investment management services and is responsible for the management and oversight of more than $30 billion in institutional fixed income assets for HilltopSecurities’ public sector municipal clients. Greg coordinates all client services and portfolio management duties, including security evaluation and portfolio analysis, trading, investment reporting, board presentations, and monitoring of broker-dealer relationships. He is an advisory committee member to the Texas Association of Counties, a member of the Government Treasurers’ Organization of Texas (GTOT), a Registered Investment Advisor, a Certified Treasury Professional (CTP) and holds FINRA Series 7, 63, and 65 licenses.
About Matt Harris, CFA
As HilltopSecurities Asset Management’s Senior Portfolio Advisor, Matt Harris specializes in investment management services for public sector municipal clients. He developed his experience in the banking industry, supporting balance sheet management, interest rate risk analysis, liquidity planning, and investment strategy implementation. At HilltopSecurities, he works closely with clients to develop and implement customized investment strategies, oversees account documentation and reporting, and assists clients with the public funds depository review process, including competitive RFP evaluations. Harris is a member of the CFA Institute and a CFA Charterholder, a Registered Investment Advisor, and holds FINRA Series 7, 63, and 66 licenses.
The paper/commentary was prepared by HilltopSecurities Asset Management (HSAM). It is intended for informational purposes only and does not constitute legal or investment advice, nor is it an offer or a solicitation of an offer to buy or sell any investment or other specific product. Information provided in this paper was obtained from sources that are believed to be reliable; however, it is not guaranteed to be correct, complete, or current, and is not intended to imply or establish standards of care applicable to any attorney or advisor in any particular circumstances. The statements within constitute the views of HTS and/or HSAM as of the date of the document and may differ from the views of other divisions/departments of Hilltop Securities Inc. and its affiliates. In addition, the views are subject to change without notice. This paper represents historical information only and is not an indication of future performance. Sources available upon request.
HilltopSecurities Asset Management is an SEC-registered investment advisor. Hilltop Securities Inc. is a registered broker-dealer, registered investment adviser and municipal advisor firm that does not provide tax or legal advice. HTS and HSAM are wholly owned subsidiaries of Hilltop Holdings, Inc. (NYSE: HTH) located at 717 N. Harwood St., Suite 3400, Dallas, Texas 75201, (214) 859-1800, 833-4HILLTOP.