American families were somewhat relieved this week as the newest inflation figures proved not quite as high as previous spikes registered during the earlier part of the year. The Consumer Price Index advanced 3.4 percent over the year until July, compared with 3.5 percent in June. And on a month-to-month basis it advanced only 0.1 percent following a month of decline. The figures were in line with what economists had expected and indicated that the most spectacular of rises that accompanied the beginning of the war with Iran is waning. Energy continues to loom large in the numbers. Even after the recent drop, prices in the energy index still stand 14.
7 percent above the same month a year ago. Gasoline increased 24.6 percent in the 12 months before July 2008, and that coupled with other energy components sent the national average in the price of a gallon of gasoline to just below four dollars. On a more recent basis of the month of July 2008, the rate was less than a dollar more expensive than a year ago. The monthly trend in the energy index was less dire with a 1.5 percent decrease in the July 2008 compared to July 2007 energy index with a large 2.9 percent falloff in gasoline for the period helping to ease the trend. Others help to ease the trend moving down weekly include fuel oil. Core inflation, which takes out the most jumpy parts that are subject to geopolitical whims (food and energy), kept easing.
It increased 2.5 percent on the year, down from 2.6 percent in June, and 2.6 percent the beginning of 2026. Long an unyielding component, shelter increased just 0.1 percent in the month and made up around 2/3rds of the monthly sum. Food prices, which rose 0.1 percent, were pushed slightly higher by the feeding frenzy on restaurants, compared to grocers. To American households those figures represent a modest bit of everyday life.
Diesel still costs more than it did last summer, and many budgets are feeling the pinch. At the same time the step-down in the rate of inflation gives consumers a little more breathing space after springtime’s whirlwind drive that lifted annual inflation to a multi-year peak. Hard pressed consumerfacing companies have had difficulty matching the pace of labor income, and Because of this workers may be facing a slight erosion of purchasing power relative to a year ago. But, they are noticing that at the check-out counter and at the pump, but the lack of another hefty monthly increase has alleviated a little of the immediate pain.
The Fed is monitoring these numbers. While policymakers have kept rates unchanged throughout most of the first half of 2026 despite inflation staying above its two per cent inflation target, a few preferred to hike the rates at the most recent meetingStill, softer data in July and a weaker recent employment report make the outlook more uncertain. The next policy meeting is set for September, and it will be before that date that the next inflation report is released. Right now markets are inclined to believe the Fed can afford to wait without risking tightening into a cooling labor market.
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