US July Inflation Eases to 3.4% as Core Prices Cool

The U.S. Bureau of Labor Statistics reported that consumer price inflation slowed to 3.4% year-over-year in July, down from 3.5% in June. The headline Consumer Price Index rose 0.1% month-over-month, meeting market expectations. Core inflation, which excludes volatile food and energy costs, slipped to 2.5% annually—the slowest pace since March 2021—while the SuperCore index fell to 2.78%, its lowest level since September 2021.

Cooling was driven by a 1.5% decline in the energy index and falling grocery costs, though gasoline prices remained above $4 per gallon following the collapse of a U.S.-Iran ceasefire. Conversely, prices for medical care, airline fares, and computers rose, the latter influenced by price hikes from Apple Inc. Economic strain persists, with July seeing a loss of 23,000 jobs and a slowing gross domestic product.

Kevin Warsh, Chair of the Federal Reserve, has maintained a commitment to price stability, though the central bank remains divided on whether to raise borrowing costs. Following the data, market traders lowered the probability of a September interest rate hike to 42%, with expectations shifting toward potential moves in October or December. However, potential volatility remains, highlighted by a planned 8% price increase from Sherwin-Williams due to raw material costs.