With inflation easing and the labor market cooling, the risks of keeping policy too tight are mounting. The CME Group now puts the implied odds of a September rate cut at 92.2 percent, reflecting growing expectations in the fed funds futures market that the Fed will respond to the softer data.

The dollar fell across the board on Tuesday after data showed that U.S. consumer prices increased moderately in July, leaving intact the case for a Federal Reserve interest-rate cut next month.

The core Consumer Price Index picked up to 3.1% Y/Y in July, its highest level since February, exceeding the 3.0% consensus and the +2.9% pace in June, according to data released by the Bureau of Labor Statistics on Tuesday.

The Consumer Price Index rose slightly less than expected in July annually as tariffs showed only a slight influence on prices. Tariffs didn't give much boost.

The consumer price index for July indicated that inflation remained steady since June. NBC News' Brian Cheung and Investopedia's Editor-in-Chief Caleb Silver break down what consumer items saw the biggest price increases as tariffs come into effect.