According to the Bureau of Labor Statistics, US consumer prices rose 3.4% in the year to July, slightly down from 3.5% in June. The figure met market expectations, leading to calm reactions in financial markets, with stocks little changed.
Energy prices remained volatile amid the ongoing Middle East conflict. While gasoline prices fell 2.9% in July compared to June, they were still up 24.6% year-over-year, keeping pressure on consumers.
On a monthly basis, inflation increased 0.1%, mainly driven by higher housing costs. Since rent constitutes a large share of household spending, even small movements in housing prices can significantly impact the overall headline figure.
Food prices rose only slightly in July, at a slower pace than in June, while energy prices declined, offering some relief. However, it is important to note that a slowdown in inflation means prices are rising at a slower rate, not that they are falling overall.
Core inflation, excluding food and energy, rose 0.2% in July after staying flat in June, with medical care and airline tickets edging higher, while car insurance continued to decline.
The new Federal Reserve chair, Kevin Warsh, has stated that the central bank's priority is to "keep inflation moving down" while avoiding unnecessary shocks to the economy. In a recent press briefing, Warsh said the Fed cannot use a "magic wand" to undo years of above-target inflation and must remain patient as price growth cools gradually.
One of the Fed's key mandates is to keep inflation near 2%, a level policymakers believe ensures price stability, supports steady economic growth, and helps prevent deeper downturns. President Donald Trump has also said inflation is still too high for many families, pointing to rent and grocery bills as signs that the cost of living remains a major concern.
Recent labor market concerns have softened expectations for a rate hike, especially after July's report showed job losses. The combination of moderating inflation and a cooling job market has led analysts to speculate about the Fed's next moves, though no immediate policy changes are anticipated.
Source: www.bbc.co.uk