US Inflation Cools Slightly as Gas Prices Fall

US inflation cooled slightly in July as gas prices fell and grocery costs declined, but overall prices remain elevated. The Labor Department reported that consumer prices rose 3.4% in July from a year ago, down from 3.5% in June.

The decline is the second straight decrease after sharply higher gas prices pushed inflation to 4.2% in May, a three-year high. However, even with the pause, prices are still rising more quickly than average wages, making it difficult for many Americans to afford groceries, gas, and healthcare.

Excluding volatile food and energy categories, core inflation slipped 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.

The Federal Reserve's goal of keeping inflation around 2% remains elusive as prices continue to rise above this target. Some economists believe that the recent decrease in inflation could ease pressure on the Fed to raise interest rates, but others caution that oil prices remain elevated and gas prices rose in late July and August.