US July consumer prices rise 3.4% year-on-year, Fed rate hikes pause

The U.S. consumer price index (CPI) increased by 3.4% in July compared to the same month last year, according to data released by the U.S. Bureau of Labor Statistics on August 12.

This annual inflation rate marks a slight deceleration from the 3.5% recorded in June and met the expectations of economists surveyed by Dow Jones. On a month-over-month basis, the CPI rose by 0.1%.

Excluding volatile energy and food prices, the core CPI saw a year-over-year increase of 2.5%, down from 2.6% in June. The month-over-month increase for the core index was 0.2%.

Both the headline and core inflation figures aligned with expert projections, leading Reuters to suggest that the Federal Reserve will find it more difficult to justify further interest rate hikes next month. However, the report also noted that wage growth has not kept pace with inflation, offering little relief to consumers.

The Federal Reserve had previously held its benchmark interest rate steady at 3.50%-3.75% in its last meeting. Economists are watching potential oil price increases due to renewed tensions between the U.S. and Iran and the possible closure of the Strait of Hormuz, which could impact future consumer price inflation, according to AFP.

Consumer price inflation had previously peaked at 4.2% in May, a three-year high, after recording 2.4% in February.