US Inflation Cools Slightly Amid Ongoing Economic Uncertainty

U.S. inflation cooled last month as gas prices fell, but costs remain elevated. According to the Labor Department, consumer prices rose 3.4% in July from a year ago, down slightly from 3.5% in June.

The modest decline could ease pressure on the Federal Reserve to raise its key interest rate to combat rising costs. However, prices are still rising more quickly than average wages, underscoring the struggle many Americans have with expensive groceries and health care.

Excluding volatile food and energy categories, core inflation rose to 2.5% in July from a year ago, down from 2.6% in June. This figure matches a post-pandemic low reached in January and February before the Iran war began.

The Iran war has had a limited impact on broader costs in the economy. Oil prices remain elevated, but gas prices fell in July. However, they rose again in late July and August, suggesting overall inflation could accelerate next month.

KPMG chief economist Diane Swonk said, 'You've got all these things that are just not the way the economy used to behave.'