US inflation cools to 3.4%: what it means for your wallet and the dollar

US inflation cooled in July: the consumer price index (CPI) rose just 0.1% month over month and the annual rate fell to 3.4%, down from June’s 3.5%. Wall Street rallied and bets on a September rate cut grew again.

The number the world was waiting for

The Labor Department report, released Wednesday, came in line with economists’ expectations. The moderation in prices — especially in energy and durable goods — relieves pressure on the Federal Reserve, which now debates whether to start cutting interest rates at its September meeting.

What it means for the dollar

When the Fed cuts rates, the dollar tends to weaken against other currencies, which makes imports cheaper for countries like the Dominican Republic and eases pressure on the exchange rate. Locally, the official reference remains around RD$58.19 per dollar.

Why it matters

The trajectory of US inflation determines the cost of money worldwide: less inflation, lower rates, cheaper credit for emerging-market companies and governments, and more room for growth. For consumers, it is also the signal that the price peak is behind us.

The key figure

3.4%. US annual inflation in July, and the strongest argument for the Fed to start cutting rates in September.