US Inflation Rate Holds Steady Above Target

The US inflation rate remains elevated as measured by a key indicator closely watched by the Federal Reserve. According to the Commerce Department, prices rose 3.7% in July compared to the same period last year, matching June's figure and staying above the Fed's target of 2%. This stubbornly high inflation has been ongoing since the US and Israel attacked Iran in late February, when it stood at 2.9%. The current rate is also a result of President Donald Trump's tariffs on Canada and China, which have driven up costs for consumers.

Excluding food and energy prices, core inflation was unchanged at 3.3% in July. This core measure had fallen to 2.6% before the tariffs were imposed in April. Consumer spending, adjusted for inflation, remained flat in July, while Americans' incomes rose by 0.4%, the highest increase since February.

The ongoing high inflation has contributed to higher longer-term interest rates, increasing borrowing costs for items like mortgages and credit cards. Many Fed officials believe that with inflation above target for more than five years, higher interest rates may be necessary to control price increases.