Consumer Price Index report for July released - here's what it means for your 401(k)

This morning was a big day for Americans who want to buy a home or keep an eye on their 401(k)s - after a surprise fall in prices.

An update to the consumer price index (CPI) showed inflation is cooling annually and actually falling month on month. 

Annual CPI for June was 3 percent, lower than the rate for May and lower than Wall Street expectations. 

And month-on-month, from May to June, inflation fell 0.1 percent - the first time that has happened in four years. Economists polled by Reuters had expected it would increase by that amount. 

US stock index futures jumped  - boosting retirement savings - after the news. The data also boosted the chances of interest-rate cuts from the Federal Reserve later this year.

While prices are still rising year-on-year, they are doing so at a much lower rate than expected - which is a boost for the economy. Most experts thought CPI would be 3.1 per cent. 

The annual rate of inflation was 3 percent in June - above the Fed's 2 percent target

Cooling inflation means more than just prices falling for Americans. 

It gives the green light to Fed officials to consider lowering interest rates - and such a move cuts borrowing costs for consumers and businesses.

The means mortgage rates falling, and a cut in credit card rates and the cost of loans for autos. That frees up money for Americans to spend, which is good for businesses.

Lower rates are good for businesses in another way too. They make it cheaper for them to borrow and grow their business.

All of the above means Wall Street likes lower rates - and that means stock prices, and 401(K)s, go up.

Even before the figures came out, world stocks had hit new all-time highs on Thursday as traders expected the figures to show inflation easing and pave the way for the Fed to start its long-awaited interest rate cut cycle as soon as September.

That was after another surge in Nvidia and other Wall Street heavyweights had seen both the Nasdaq and S&P 500 close at new peaks on Wednesday.

'The main driver is really the prospect of interest rate cuts,' said Shane Oliver, chief economist and head of investment strategy at AMP in Sydney. 

'If we get a good inflation read, it will tick one of Powell's boxes.'

U.S. Federal Reserve Chair Jerome Powell told lawmakers on Capitol Hill on Wednesday that 'more good data' would build the case for the U.S. central bank to cut interest rates. Futures pricing implies about a 75 percent chance of a cut in September.