The July Consumer Price Index (CPI) report saw prices rise 0.2% from June, which was in line with estimates, and 2.9% from a year ago, which was slightly better than the Bloomberg consensus estimate of 3.0%. Citi chief global economist Nathan Sheets and ICG head of economics and investment research Nicholas Brooks join Morning Brief to break down the print and what it signals for any Federal Reserve's interest rate cuts.

"This is a report that, one, is very much in line with expectations; two, is consistent with the Fed's expectations for ongoing disinflation of the US economy," Sheets explains. "And three, if I'm Jay Powell and I'm thinking about the components of inflation, the part of the inflation process that I know has been the most stubborn, but is also the one that is likely to be coming down with the greatest confidence, is the shelter component.

"So if I'm going to have the preponderance of the rise in the shelter piece, that's good news for me that it's not in the non-shelter services part that's been so stubborn and is linked to tight labor markets and wages," Sheets says of the print. He sees the report as a "green light" for the Federal Reserve in September to start cutting interest rates.

Brooks notes that while some of the most recent economic data points to the economy slowing, it's not so dramatic that it warrants interest rate cuts totaling 100 basis points over the next few months.

"I do think that the trend is downward for interest rates in the US, and I think that we are at the beginning of a long cutting cycle. But I do think that perhaps markets have overegged it a little bit, as they did earlier this year, as I think the growth data actually is still pretty decent," he explains. Sheets believes that following this CPI print, it will be a "close call" between a 25 and 50-basis-point cut at the Fed's September meeting, which other economic data points could clarify in the coming days.

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This post was written by Melanie Riehl