U.S. consumer prices rise 0.2% in July as forecast

U.S. consumer prices increased 0.2% in July, matching expectations as shelter and food costs rose while energy prices fell.

The Labor Department’s Bureau of Labor Statistics reported on Wednesday that the Consumer Price Index (CPI) rose 3.2% year-over-year, unchanged from June’s revised reading. On a monthly basis, the index increased 0.2%, in line with the median forecast in a Reuters poll of economists.

Shelter costs, which account for about a third of the CPI, rose 0.4% in July, contributing to the overall increase. Food prices also climbed 0.2%, while energy prices declined 2.0%, led by a 5.0% drop in gasoline costs. Excluding volatile food and energy components, core CPI rose 0.2% month-over-month and 4.7% year-over-year, matching June’s annual pace.

The data suggests inflation remains sticky, particularly in services and housing, despite recent declines in goods prices. Economists note that while energy prices have eased, persistent shelter inflation could keep pressure on the Federal Reserve as it considers further policy adjustments.

The Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, has also shown limited progress toward the central bank’s 2% target. Markets are pricing in a 90% chance of the Fed holding interest rates steady at its September meeting, with some traders anticipating a potential hike later in the year if inflation fails to cool further.

The CPI report follows recent mixed signals on the U.S. economy, with retail sales and labor market data suggesting resilience despite higher borrowing costs.