NEW YORK — U.S. consumer prices rose 3.4 percent annually in July, marking the second consecutive month of easing inflation. The figure met economists' expectations, suggesting price pressures may have peaked for 2026.
Core CPI, which excludes volatile food and energy costs, slipped to 2.5 percent annually from 2.6 percent in June — edging closer to the Federal Reserve's 2 percent target.
The July data arrives ahead of the Fed's September rate decision and follows a sharply weak jobs report last week showing employers cut 23,000 positions, against a forecast of 95,000 new hires.
Inflation has retreated since hitting a three-year high of 4.2 percent in May. Before the war with Iran, the rate stood at 2.4 percent in February. Some economists forecast continued easing through year-end.
Wage growth in July measured 3.2 percent annually, remaining below the overall inflation rate. Heather Long, chief economist at Navy Federal Credit Union, said, "Inflation is wiping out wage gains for many."
Energy prices jumped 14.7 percent over the past year, driven largely by gasoline costs, which rose 24.6 percent. Oil prices surged in July as tensions escalated in the Strait of Hormuz and Houthi rebels targeted Red Sea shipping.
Brent crude climbed from about $71 a barrel at the start of July to above $100 by July 23. American drivers paid an average of $4.06 a gallon last month, compared with about $3 a gallon in February before the Iran war.
Despite the year-over-year increase, average daily gas prices in July ran about 10 cents cheaper than in June. Mark Zandi, chief economist at Moody's Analytics, confirmed that decline ahead of the CPI release.
White House spokesman Kush Desai said the July CPI report shows President Trump's agenda is delivering, citing falling prescription drug and auto insurance costs, rising real wages and cooled beef prices.
Long said the data "gives new Fed Chair Kevin Warsh some cover to wait and see what happens this fall before he has to act."
Higher interest rates remain the Fed's primary tool to temper inflation, with costlier borrowing aimed at dampening demand and slowing the economy. Barring fresh escalations in the Iran war, inflation could continue to ease toward the Fed's 2 percent annual goal.
