In July, import prices increased by 0.4% due to higher costs for fuel and nonfuel items.
by VT Markets
/
Aug 15, 2025
In July, US import prices increased by 0.4%, which was higher than the expected 0.0% rise. Before that, import prices had gone up by 0.1%. Year over year, import prices stayed at -0.2%, unchanged from the previous figure.
Export prices rose by 0.1% for the month, matching predictions, but dropped from a previous increase of 0.5%. The rise in import prices was mainly due to higher costs for both fuel and non-fuel imports.
Reevaluating the Disinflation Story
The surprise 0.4% rise in July’s import prices makes us rethink the idea of disinflation. This data point, affected by both fuel and non-fuel costs, indicates that underlying price pressures might be tougher to control than expected. As a result, the Federal Reserve’s plan for possible rate cuts now appears more challenging.
This concern deepens as Brent crude prices have recently climbed back above $85 a barrel, impacting fuel prices directly. Last week’s retail sales report also showed a surprising 0.5% increase, indicating strong consumer demand is driving up prices. We will keep an eye on whether this pressure affects the next Producer Price Index reading.
We remember the steady disinflation seen in the second half of 2024, which had led many to expect a Fed shift in policy. This new data pushes back expectations for rate cuts, altering the timeline. Traders should now prepare for a flatter yield curve and explore strategies that benefit from higher short-term rates, like selling SOFR futures contracts.
Effects on Equity Markets
For equity markets, the possibility of sustained higher interest rates could be a challenge, especially for growth-oriented sectors. It may be wise to hedge long positions with put options on major indices such as the S&P 500. This situation also favors a stronger US dollar, making long positions in the Dollar Index (DXY) appealing compared to currencies from more dovish central banks.
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by VT Markets
Aug 15, 2025
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