WASHINGTON D.C — Underlying U.S. inflation picked up in July, posting its strongest monthly gain since the start of the year, a sign that price pressures may not be easing as quickly as hoped.
Join our WhatsApp groupSubscribe to our Daily Roundup Email
The core consumer price index — which excludes volatile food and energy costs and is closely watched by the Federal Reserve — rose 0.3% from June, according to Labor Department data released Tuesday. On an annual basis, the index increased 3.1%, marking a slight acceleration from previous months.
The rebound in core inflation suggests the Fed’s battle to bring price growth back to its 2% target remains challenging. Economists say the July uptick was driven in part by higher housing costs, medical services, and insurance prices.
Headline inflation, which includes all categories, rose at a slower pace, held down by falling gasoline prices. But policymakers tend to focus more on the core measure as a better indicator of underlying trends.
Some analysts cautioned that while one month’s data does not signal a trend, the report could delay expectations for interest rate cuts. “This is a setback for those anticipating a quicker pivot by the Fed,” said Diane Swonk, chief economist at KPMG.
The central bank has kept its benchmark interest rate at a 23-year high in recent months to curb consumer demand and slow inflation. Fed Chair Jerome Powell has said officials will need “greater confidence” that inflation is moving sustainably toward 2% before lowering borrowing costs.
The next Fed policy meeting is scheduled for September, and markets will be watching closely for any signs the central bank will adjust its rate path in response to the latest figures.