Inflation remained sticky in July, according to new government data released Tuesday, as investors stay alert to how much President Trump’s tariffs are starting to affect consumer costs.
The latest data from the Bureau of Labor Statistics showed that “core” inflation, which excludes volatile food and energy costs, rose 0.3% over the past month, surpassing June’s 0.2% uptick and marking the largest gain in six months.
Annual core prices rose 3.1% in July, up from June’s 2.9% year-over-year increase, signaling that rising goods inflation is no longer being offset by easing services inflation. Core services prices also firmed, with shelter rising 0.2% for the second consecutive month, while transportation services and medical care services each climbed 0.8%, up from respective gains of 0.2% and 0.6% in June.
Read more: July CPI breakdown: Consumers feel the crunch of accelerating inflation
Heading into the report, economists expected the core Consumer Price Index (CPI) to rise 3% year over year and 0.3% month over month.
On a headline basis, CPI increased 2.7% on an annual basis in July, matching June’s number and slower than economists’ expectations of a 2.8% rise.
Month over month, prices rose 0.2% compared to June’s 0.3% increase, on par with economists’ estimates. The monthly drop was driven by lower gasoline prices and moderately softer food inflation.
“Although core annual inflation is back to its highest level since February, today’s CPI print is not hot enough to derail the Fed from cutting rates in September,” Seema Shah, chief global strategist at Principal Asset Management, wrote in reaction to the report.
Shah noted some evidence of tariff-related pass-through to consumers, though not yet at a level that “rings alarm bells.” One example: Footwear prices jumped 1.4% in July from the prior month — the largest monthly increase since April 2021.
Other categories seeing increases included furniture and bedding, recreation, household furnishings and operations, and used cars and trucks. Airline fares jumped 4% after a 0.1% decline in June, while lodging away from home and communication were among the few major indexes to fall last month, according to the BLS.
Tuesday’s report arrives amid ongoing trade developments that could further alter the US effective tariff rate, now hovering near 18.6% — the highest since 1933, according to the latest Yale Budget Lab estimate.
Read more: What Trump’s tariffs mean for the economy and your wallet
The back-and-forth raises fresh questions about the Federal Reserve’s rate-cutting path.
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