However, the Federal Funds Rate determines how much banks charge each other when they lend reserves overnight. So, changes (and expected changes) to Fed interest rates, and the resulting impact on the prime rate and Treasury yields, influence how much shoppers and businesses pay in interest and have left over to spend.

For investors, the July CPI print was just right, as it raised the odds of a rate cut at the next Fed meeting while showing that inflation isn't spiraling.