July's inflation report was close enough to expectations to ease pressure on the Federal Reserve to raise interest rates next month.

Wall Street was especially tuned to today's CPI release because Fed officials signaled they were watching it more closely too.

For the past year, officials have forecast that inflation would return to their 2% goal without further rate increases, but some now believe higher rates will be necessary. Others have said they could join this hawkish minority if additional data make the forecast harder to defend.

The forecast has rested on the view that current rates are restrictive enough, and that inflation has stayed elevated because of shocks rather than because policy is too loose. The thinking has been that tariffs would raise costs once and fade, and energy prices would follow crude oil lower as Middle East hostilities eased.

Instead, the shocks have persisted and now overlap with a surge in demand from the AI build-out that is raising prices for technology equipment and software.