US Inflation Slows Below 3% in July as Consumer Prices Rise Moderately

In July, US consumer prices experienced a moderate increase, marking a significant milestone as inflation slowed to below 3% for the first time in nearly 3-1/2 years. The Labor Department’s report on Wednesday indicated that the annual rise in inflation had tapered off to 2.9%, a notable decrease from June’s 3.0%.

The July increase in the Consumer Price Index (CPI) by 0.2%, following a 0.1% decline in June, aligns with economists’ expectations. The modest rise in consumer prices suggests that inflation is on a downward trend, a development that could prompt the Federal Reserve to consider cutting interest rates in September.

However, the potential for a larger rate cut remains uncertain. While the slowing inflation is a positive sign, economists caution that the Fed may not pursue a 50-basis-point reduction unless there is further weakening in the labor market. The recent jump in the unemployment rate to 4.3% could influence the central bank’s decision.

Shelter costs, which include rents, played a significant role in the CPI increase, accounting for nearly 90% of the overall rise. Food prices also saw a slight increase, with grocery store prices edging up by 0.1%. Egg prices, in particular, spiked by 5.5%, contributing to the overall rise in food costs.

Gasoline prices remained unchanged in July after two months of decline, while natural gas prices saw a 0.7% decrease. Electricity costs, on the other hand, increased marginally.

As inflation slows and consumer prices rise at a more moderate pace, the Federal Reserve’s approach to interest rates will be closely watched, especially with the US presidential election approaching in November. The ongoing concerns over rising rents and food prices could weigh heavily on voters’ minds as they head to the polls.