- A new Labor Department report finds U.S. inflation eased to 3.4% in July.
- Core inflation hit 2.5% last month, also down slightly.
- U.S. gas prices remain a major inflation driver and are up 25% over last year.
The average rate of price increases on U.S. goods and services over the last year inched down to 3.4% in July, according to a new Labor Department report, as petroleum industry price shocks, driven in large part by the ongoing Middle East conflict, propped up the headline rate.
The latest Consumer Price Index Summary finds annual inflation ticked down in July from June’s 3.5% rate and core inflation, which strips out volatile food and energy prices, hit 2.5% last month, also down 0.1% from June.
While overall energy prices moved down 1.5% on a monthly basis in July, gasoline prices are running 24.5% higher than this time last year and fuel oil is more than 39% more costly over the past 12 months.
Grocery prices in July were running 2.7% more than a year ago, matching the uptick in the cost of medical services. Prices for apparel items were up 3.9% and the housing-related costs were 3.2% higher.
Regional inflation for the Mountain West states, which include Utah, was markedly lower than the national rate at 2.7% in July, unchanged from June’s annual rate.
“America still has an inflation problem, but there are encouraging signs that price pressures outside of the gas pump are easing,” Heather Long, chief economist at Navy Federal Credit Union, told the Associated Press on Wednesday.
The average price for a gallon of regular gasoline across the country was $4.04 on Wednesday, according to tracking by AAA. That rate was up 3 cents per gallon from Tuesday and is almost 90 cents per gallon more expensive than a year ago. Utah drivers are seeing prices significantly higher than the national average rate with prices across the state averaging $4.33 per gallon on Wednesday, per AAA.
Will latest inflation reading keep interest rates down?
While the Fed hasn’t made any adjustments to its benchmark interest rate since closing out 2025 with a series of three straight increases, economists had been predicting the likelihood of a hike coming at the U.S. central bank’s next policy meeting in September.
But Wednesday’s muted inflation rate, along with a jobs report released last week that cast a shadow over the vibrancy of the country’s labor market, is now moving odds in favor of the monetary body standing pat on its current range rate of 3.5% – 3.75% next month.
The latest Labor Department reporting finds U.S. employers trimmed rolls by 23,000 positions in July, far short of the 80,000 or more new jobs that were predicted by most economists. On top of the dreary monthly tally, revisions cited in the report reduced May and June job totals by a combined 103,000 positions. July’s figures, along with the revisions, dragged the average monthly job totals over the past year down to 34,000.
Generally speaking, Federal Reserve rate reductions help spur economic activity by reducing the cost of debt which can promote business activities like investment and hiring. Rate hikes, which increase the cost of consumer and commercial debt, quell spending and help slow down inflationary price increases.
“In-line inflation will keep the ‘no need to hike rates’ narrative that took hold after last week’s jobs report intact,” Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management, told CNBC. “There will be another round of inflation data before the September FOMC meeting, so the storyline could still change. But unless those numbers tell a much different story, the Fed will likely still be in a position to leave rates unchanged next month.”