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In July, consumer prices increased 0.2% over the month and 2.7% over the year, the same as the annual rise in June. Core CPI, which excludes more volatile energy and food prices, rose 0.3% over the month and 3.1% over the year, slightly higher than the 2.9% 12-month increase in the month prior.

Energy costs fell 1.1% over the month in July, after rising 0.9% in June, and declined 1.6% over the year. Within the energy index, gasoline prices plunged 2.2% from June, after increasing 1.0% the month prior, and declined 9.5% from July 2024. Meanwhile, electricity and utility (piped) gas prices dipped 0.1% and 0.9%, respectively, over the month, but surged 5.5% and 13.8% over the year.

In July, food prices stayed the same as June, with prices for food at home edging down 0.1%. On the other hand, food prices rose 2.9% over the year, with food at home advancing 2.2%. Meanwhile, prices for food away from home climbed 0.3% from June and 3.9% from July 2024. The indexes for major grocery store food groups were mixed, with two increasing, three decreasing and one staying the same.

The shelter index grew 0.2% over the month and 3.7% over the year, dipping slightly from the 3.8% 12-month increase in June. Meanwhile, prices for transportation services soared 0.8% over the month and 3.5% over the year, with airline fares leading the monthly increase, rising 4.0% from June. Motor vehicle maintenance and repair led the over the year increase, surging 6.5% from July 2024.

Both the headline inflation rate and core inflation rate have ticked up slightly from last year in recent months, but likely not enough to deter Federal Reserve officials from cutting their interest rate target later this year, particularly since weakness in the labor market has increased in recent months. Therefore, markets anticipate that the Federal Open Market Committee will lower its interest rate target by 25 basis points at its meeting next month.