U.S. inflation cooled for a second straight month in July, another sign that spring’s energy-driven price shock is fading even as inflation remains stubbornly above the Federal Reserve’s 2% target.
Key Takeaways
U.S. CPI eased to 3.4% in July, extending inflation’s retreat from May’s 4.2% peak.Federal Reserve pressure eased as core CPI cooled to 2.5%, but energy remains a risk.Bitcoin held near $64,000 as markets turned toward the Sept. 11 CPI report.Housing remains one of inflation’s hardest problems to shake. Shelter prices increased 0.1% in July and supplied roughly two-thirds of the monthly gain in the overall CPI. Rent and owners’ equivalent rent, which estimates what homeowners would pay to rent their properties, both increased 0.3%.
Food prices crept 0.1% higher, with restaurant and other food-away-from-home prices rising 0.3%. Grocery prices fell 0.1%. Energy went the other way, dropping 1.5% during July as gasoline prices declined 2.9% on a seasonally adjusted basis.
Gasoline’s 24.6% Spike Keeps Inflation’s Fuse LitCore inflation delivered the cleaner signal. Its 2.5% annual pace ranks among the softest readings since early 2021, though several service categories kept moving higher. Medical care rose 0.4% in July, airline fares jumped 2.2%, used cars and trucks gained 0.4%, and new vehicles added 0.1%.
Fed Gets Breathing Room, but Victory Is Nowhere CloseJuly’s inflation print takes some immediate heat off another rate increase, but energy remains the obvious tripwire. Another oil shock or sticky services inflation could put tighter monetary policy back on the table later this year, especially if housing costs quit cooling.
Financial markets had mostly positioned for the softer print, muting the opening reaction across equities and other risk assets. Real average hourly earnings also showed a modest strain as consumer prices outpaced wage growth in some measures.
Bitcoin Sticks Near $64,000 as CPI Fails to Spark FireworksBitcoin has spent recent weeks grinding through the low-to-mid $60,000s, with the inflation print failing to unleash the violent volatility seen during earlier stretches of macroeconomic uncertainty.
The next reckoning arrives Sept. 11, when the government is scheduled to release August CPI data. Investors and Fed officials will scrutinize energy, shelter, and core services for proof that July’s cooling is developing into something durable rather than another transitory break in inflation.
