US Inflation Eases to 3.4%, Still Above Fed Target

The US inflation rate has eased slightly to 3.4% in July, but remains well above the Federal Reserve's target of 2%. The consumer price index (CPI) increased by this amount year-on-year last month, down one-tenth of a percentage point from June.

Core inflation, which excludes volatile items like energy and food, rose 2.5% from a year earlier, also down one-tenth of a percentage point from June. Energy prices have climbed 14.7% over the past 12 months, driven by the ongoing energy crisis triggered by the war in Iran.

Food prices have increased 3% over the past year, with grocery prices continuing to rise faster than policymakers would like. However, signs of moderation are beginning to emerge, as three of the six major grocery store food group indexes decreased in July.

The Fed has opted to wait until September before making a decision on interest rates, despite inflation remaining well above target and the labor market showing signs of slowing, with the economy shedding 23,000 jobs in July. Seema Shah, chief global strategist at Principal Asset Management, said that today's CPI print, alongside July's drop in payrolls, should lower expectations for a September hike, but does not put it completely to bed.