US inflation eased to 3.4% in July on falling energy prices

U.S. consumer prices saw a slight increase in July, with the Consumer Price Index (CPI) rising a tenth of a percent to 3.4% year-over-year. This moderation was primarily driven by a decrease in energy prices, aligning with analyst forecasts for continued fuel cost declines following a spike linked to the conflict in Iran.

The core inflation rate, which excludes volatile energy and food components, also dipped to 2.5%, a tenth of a percentage point lower than in June, according to the Bureau of Labor Statistics (BLS). While this figure remains above the Federal Reserve's 2% target, it marks a decrease from the 4.2% peak reached in May 2023.

On a monthly basis, overall inflation ticked up by a tenth of a percent after a previous 0.4% drop. The core inflation rate saw a 0.2% monthly increase, contrasting with a flat reading in June. The energy index fell 1.5% in July, a less significant drop than the 5.7% decrease in the prior month. This decline occurred despite renewed tensions in the U.S.-Iran conflict and the closure of the Strait of Hormuz, a critical shipping route.

Housing costs contributed significantly to the monthly increase, accounting for roughly two-thirds of the general index's rise. Food prices also saw a 0.1% increase, with food consumed away from home rising 0.3%. These increases partially offset the broader deceleration. Annually, energy prices surged 14.7%, and food prices rose 3% over the past year. Other indices that grew in July included healthcare, airfares, communication, education, and recreation, while motor vehicle insurance costs decreased.