The latest Consumer Price Index (CPI) data for July shows that U.S. inflation continued to rise, though at a slightly cooler pace than some economists had anticipated. The all-items index increased by 2.7% on an annual basis, a slight moderation from the 2.8% that was forecast. On a month-over-month, seasonally adjusted basis, the index rose 0.2%, in line with expectations.
A significant contributor to the monthly increase was the shelter index, which rose by 0.2% in July. The index for all items less food and energy, often referred to as core inflation, also saw an increase, rising 0.3% for the month and 3.1% over the past year. This core measure is closely watched by the Federal Reserve as it provides a clearer picture of underlying price trends, excluding the volatile costs of food and energy.
While the overall inflation figure was slightly below some predictions, it remains above the Federal Reserve's long-run 2% target. The data will be a key factor for the Fed as it considers its next moves on interest rates, particularly amid concerns that prices in certain categories, such as apparel and home furnishings, might be impacted by recent tariff policies.
Other notable changes in July's CPI data include a 0.7% monthly rise in the index for dairy and related products, a 1.5% increase in the beef index, and a 3.9% decrease in the eggs index. The new vehicles index remained unchanged, while the communication index fell 0.3%.
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