Falling gas prices gave Americans a slight break from the pain of high inflation last month, though overall price increases slowed only modestly from the four-decade high that was reached in June.
Consumer prices jumped 8.5% in July compared with a year earlier, the government said this morning, down from a 9.1% year-over-year jump in June. On a monthly basis, prices were basically unchanged from June to July, the smallest such rise in more than two years.
Besides gasoline, among the consumer purchases whose prices sank from June to July were airfares, which plunged nearly 8%. Hotel room costs fell 2.7%, used car prices 0.4%. Such items had previously delivered some of the economy’s steepest price jumps.
Those declines lowered so-called core inflation, a measure that excludes the volatile food and energy categories to provide a clearer picture of underlying inflation. Core prices rose just 0.3% from June, the smallest month-to-month increase since April. And compared with a year ago, core inflation amounted to 5.9% in July, the same year-over-year increase as in June.
This morning’s report raised hopes that a modest slowdown in inflation might enable the Federal Reserve to raise short-term interest rates by less than had been anticipated when it meets in late September. Many economists had forecast that the Fed would increase its benchmark rate three-quarters of a point for a third straight time. But financial markets are now predicting that a half-point increase is more likely. See the report.Â
