U.S. inflation was unchanged in July as rising prices for some imported goods were balanced by falling gas and grocery prices, leaving overall prices modestly higher than a year ago.
Consumer prices rose 2.7% in July from a year earlier, the Labor Department said Tuesday, the same as the previous month and up from a post-pandemic low of 2.3% in April. Excluding the volatile food and energy categories, core prices rose 3.1%, up from 2.9% in June. Both figures are above the Federal Reserve’s 2% target.
The figures suggest that slowing rent increases and cheaper gas are offsetting some impacts of President Donald Trump’s sweeping tariffs. Many businesses are also absorbing some of the cost of the duties. Tuesday’s figures likely include some impact from the 10% universal tariff Trump imposed in April, as well as higher duties on countries such as China and Canada.
Still, stubbornly high inflation puts the Federal Reserve in a difficult spot: Hiring slowed sharply in the spring, after Trump announced tariffs in April. The stalling out of job gains has boosted financial market expectations for an interest rate cut by the central bank.
Chair Jerome Powell has warned that worsening inflation could keep the Fed on the sidelines—a stance that has enraged Trump, who has defied traditional norms of central bank independence and demanded lower borrowing costs.
Gas prices fell 2.2% from June to July and have plunged 9.5% from a year earlier, the government’s report said. Grocery prices slipped 0.1% last month, though they are still 2.2% higher than a year ago. Restaurant meals continued to get more expensive, however, rising 0.3% in July and 3.9% from a year earlier.
