U.S. Inflation Holds Steady in July as Tariff Impact Remains Limited
by Worthy News Jerusalem Bureau Staff
(Worthy News) – U.S. annual inflation was unchanged in July at 2.7%, coming in below economists’ expectations and signaling limited early impact from President Donald Trump’s latest tariffs. The Bureau of Labor Statistics reported Tuesday that core inflation–which strips out volatile food and energy–rose to 3.1% from June’s 2.9%, slightly above forecasts and the highest since March.
On a monthly basis, the consumer price index (CPI) increased 0.2%, down from June’s 0.3% rise. Core CPI climbed 0.3%, matching consensus estimates. Lower energy and grocery prices helped offset higher housing and service costs, preventing a sharper rise in overall inflation.
The shelter index, a major driver of July’s increase, rose 0.2%, with primary residence rents up 0.3%. Despite hopes for relief, housing costs remain elevated, with the median sales price for an existing home hitting a record $435,300. Asking rents in June rose 0.6%, just shy of all-time highs, according to Redfin.
Energy prices fell 1.1% in July, including a 2.2% drop in gasoline and a 0.1% decline in electricity. Grocery prices dipped 0.1%, led by a 3.9% plunge in egg prices. Restaurant meals rose 0.3%. In tariff-sensitive categories, price changes were modest–new vehicle prices were flat, used cars rose 0.5%, and apparel edged up 0.1%.
Financial markets welcomed the report. The Dow Jones Industrial Average and Nasdaq Composite both rose about 0.4% before the opening bell. The 10-year Treasury yield fell below 4.27%, and the U.S. dollar index slipped 0.2%. Chris Zaccarelli, CIO of Northlight Asset Management, said the report “did nothing to convince anyone” in the debate over tariffs’ inflationary effects, but likely keeps the Federal Reserve on track for a September rate cut.
The Fed is balancing inflation above its 2% target against signs of labor market weakness. July’s jobs report showed just 73,000 positions added, with prior months revised down by 258,000. Fed Vice Chair for Supervision Michelle Bowman has urged a proactive rate cut to prevent further job losses, while Atlanta Fed President Raphael Bostic remains cautious, citing uncertainty over whether tariff effects will persist.
Looking ahead, the Cleveland Fed’s Inflation Nowcasting model projects the August annual inflation rate will rise to 2.9%. Bankrate’s Greg McBride warned that “with more tariffs in the pipeline, the likelihood is that inflation will move higher before it moves lower.” Policymakers will watch upcoming producer price index (PPI) and trade price data later this week for additional signs of where inflation is headed.
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