Consumer inflation eased to 3.4% in July, despite recent energy shocks

Consumer inflation eased to 3.4% in July, despite recent energy shocks

Claire Boston · Senior Reporter

Wed, August 12, 2026 at 5:42 PM GMT+3 2 min read

• CL=F -0.25%

The latest inflation data showed price growth easing slightly in July, even as recent reescalations in the war with Iran have sparked oil price volatility.

The closely watched Consumer Price Index rose 3.4% in July from a year ago, down slightly from June's 3.5% annual increase. On a monthly basis, prices rose 0.1% from June after a surprise 0.4% drop. Both the annual and monthly readings matched economists' expectations.

Energy prices rose over the course of July after a ceasefire between the US and Iran fell apart and oil prices moved higher, but prices at the pump remained slightly lower on average than they were in June, according to US Energy Information Administration data.

Gasoline prices fell 2.9% from a month earlier, though they're up 24.6% in the past year. Broader energy prices declined 1.5%.

Read more: What is the Consumer Price Index?

Shelter costs ticked up 0.1% from June, and food prices were up 0.1%. Prices for food away from home, a category that includes restaurant meals and fast food, rose 0.3% month over month.

"Expensive gas (is) still an issue, but moderating food and rent prices are a big help to American households," Heather Long, chief economist at Navy Federal Credit Union, wrote in a post on X.

Prices for certain foods, like beef, fish, and coffee, remain sharply higher than a year ago. Beef prices jumped 9.4%, and coffee is up 10.3%.

Lettuce prices, however, plunged 16.4% in a month. Most food prices are volatile, but health officials are investigating a 15-state outbreak of cyclospora infections linked to iceberg lettuce.

Core inflation, which strips out volatile food and energy prices, was up 2.5% from a year ago, and 0.2% from June.

Consumers are getting some relief on bruising insurance costs, with auto insurance showing a 4.5% annual decline and health insurance dropping 8%.

The cost of plane tickets, though, has continued to rise even as gas prices moderate. Airfare rose 2.2% from June to July and is up 25.5% in the past year.

Inflation in line with expectations will likely keep the Fed divided over whether to hike interest rates at its September meeting, even as the labor market shows signs of weakening.

Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments

As of Wednesday morning, traders saw a 64% chance that benchmark interest rates will hold at 3.5% to 3.75% next month, according to CME FedWatch. Before the latest inflation data, they saw roughly 50-50 odds of a 25 basis point rate hike next month as the Fed grapples with contradictory signals about inflation and the labor market.

Although recent inflation readings remain well above the Fed's 2% target, the US shed jobs last month.

Claire Boston is a senior reporter for Yahoo Finance covering housing, mortgages, and home insurance.

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