US Inflation Rate Slows but Remains Above Target

The US inflation rate continued to cool down in July, but it still outpaced average paychecks. The Labor Department reported that consumer prices rose 0.1% from June to July, meeting forecasters' expectations. Over the year, prices were up 3.4%, a slower pace than the previous month.

The annual inflation rate has been above the Federal Reserve's 2% target for five years, and it remains a concern for policymakers. While slowing inflation is good news for consumers struggling with the cost of living, their paychecks may not be keeping up. Average hourly earnings for private nonfarm payrolls rose just 3.2% over the year in July.

Seema Shah, Principal Asset Management's chief global strategist, said that cooling annual inflation combined with a weak July jobs report should lower expectations for a September rate hike. However, she noted that 'it does not put it completely to bed.' With the Strait of Hormuz still shut, upside inflation risks will remain top of mind for the foreseeable future.