US consumer inflation eased to 3.4% in July, strengthening the case against another immediate interest rate increase by the Federal Reserve even as prices remain well above the central bank’s 2 % target.
The Consumer Price Index rose 0.1% in July after falling 0.4% in June, according to data released Wednesday by the US Bureau of Labor Statistics. Annual inflation declined from 3.5% in June to 3.4% in July.
The latest figure was in line with economists’ expectations and represents another month of moderation following May’s 4.2% annual increase. Inflation had risen sharply in May, partly reflecting higher energy costs, before falling in June and July.
Core inflation, which excludes food and energy prices, rose 0.2% in July and was up 2.5% from a year earlier, compared with a 2.6% annual increase in June.
Shelter and Food Driving Inflation
Shelter prices rose 0.1% during the month and accounted for roughly two-thirds of the overall monthly increase in consumer prices. Food prices also rose 0.1% while prices for food consumed away from home increased 0.3%.
Energy prices, by contrast, fell 1.5% in July. Gasoline prices declined 2.9% during the month, helping to contain the headline inflation rate.
Energy prices were however still 14.7% higher in July than a year earlier, while gasoline prices were up 24.6% Food prices increased 3% over the same period.
Weak Jobs Report Adds to Pressure
The inflation figures come less than a week after a surprisingly weak US employment report.
US employers cut 23,000 jobs in July, according to the Bureau of Labor Statistics, compared with an average monthly gain of 34,000 over the previous 12 months. The unemployment rate, however, remained at 4.1%.
Employment growth for May was revised down from 129,000 to 63,000, while June’s figure was cut from 57,000 to 20,000. Together, the revisions reduced previously reported employment by 103,000 jobs.
