In a twist that should surprise absolutely no one, the core inflation in the United States declined for the fourth consecutive month in July. This development conveniently keeps the Federal Reserve on its predetermined path to lower interest rates next month, much to the delight of Wall Street’s ever-optimistic investors.

The core Consumer Price Index, which excludes the volatile food and energy sectors, rose by 3.2% in July compared to the previous year. This marks the slowest pace since early 2021. On a month-to-month basis, it increased by 0.2%, a marginal increase from June’s unexpectedly low figure. Naturally, this data is the beacon of hope for investors and economists alike, despite being more of a statistical hiccup than a sign of real progress.

Housing prices, which also saw a 0.2% increase from the previous month and a 2.9% annual rise, were the main drivers of this inflation, contributing to a whopping 90% of the monthly uptick. Clearly, the cost of keeping a roof over one’s head remains as stubborn as ever.

And yet, despite the inflationary elephant in the room, there’s a growing consensus that the Fed will begin its much-anticipated rate cuts next month. With inflation seemingly under control for some analysts, the Fed can start lowering rates while maintaining a broadly restrictive policy.

The Fed’s bigwigs still have to sift through another set of inflation metrics and yet another employment report before their September meeting. After all, July’s disappointing job numbers triggered a global market selloff and rekindled those ever-present recession fears.

Fed Chair Jerome Powell and his colleagues have recently been fixating more on the labour side of their dual mandate, something they’re likely to emphasize at their annual symposium in Jackson Hole, Wyoming, next week.

Despite the last CPI report, Fed officials and economists prefer to dig deeper, examining the data to two decimal places to better understand the inflation trajectory. On this more precise basis, core CPI ticked up by 0.17%, with the three-month annualised rate rising by 1.58%—the lowest since February 2021. The devil is in the details.

Naturally, the most disappointing part of the report was housing costs. Economists and policymakers hoped these would ease and help bring inflation closer to the Fed’s target. Instead, housing—the largest category of services—jumped by 0.4% after a 0.2% rise in June.  Rent, always the star of the inflation show, also saw a 0.4% increase—primary residence rent spiked by 0.5%, the highest jump since February. In more encouraging news, prices for clothing, new and used cars, and airline tickets all dropped last month.

Meanwhile, apart from housing and energy, service prices nudged up by 0.2%—the first increase in three months, yet still at a moderate pace. Central bankers, who seem to love nothing more than dissecting these indicators, will be closely watching this data. However, since this measure, known as the Personal Consumption Expenditures (PCE) index, gives less weight to housing, it’s expected to trend closer to the Fed’s 2% target.

As the market eagerly awaits the upcoming PCE measure, there’s cautious optimism that it might confirm the Fed’s steady hand on the economic tiller. However, one can’t help but wonder if all this optimism is just a prelude to the next market shock.

And so, we march on, eyes fixed on Wednesday’s CPI figures and the hope that this time, just maybe, we’ll avoid another market meltdown. Because if there’s one thing we’ve learned, it’s that in the world of high finance, hope springs eternal—right up until the next crisis.

Unless the FED is genuinely concerned about a downturn in the employment market, the data is still insufficient to confirm that inflation is behind us and to decide on cutting interest rates.