July Consumer Inflation Cools; Annual Core Rate Tops 3%

10:51 AM EDT, 08/12/2025 (MT Newswires) -- US consumer inflation slowed down last month on a sequential basis, while the annual core rate jumped above 3%.

The consumer price index rose 0.2% month on month in July, decelerating from a 0.3% gain in the month prior, the Bureau of Labor Statistics reported Tuesday. The print was in line with the Bloomberg-polled consensus estimate.

Annually, inflation held steady at 2.7%, below the Street's expectation that called for an acceleration to 2.8%.

Core inflation, which excludes the volatile food and energy components, accelerated to 0.3% last month from 0.2% in June, in line with the Street's forecast. The annual core measure accelerated to 3.1% from 2.9%, ahead of the average analyst estimate for a 3% increase.

"The larger rise in core prices in July provides mixed evidence around the tariff boost to inflation," Oxford Economics Deputy Chief US Economist Michael Pearce said in remarks emailed to MT Newswires. "There are clear signs a range of goods prices are moving higher, pushing core goods inflation to a more than two-year high, but some major tariffed items, including autos and major appliances, have yet to show much impact."

Pearce expects core inflation to reach a peak of 3.8% by the end of the year, "as tariffs bleed through more fully to consumer prices."

Energy prices decreased 1.1% in July, swinging from a positive reading the month prior. On an annual basis, the energy index moved down 1.6%. Food prices were flat, compared with 0.3% growth in June, while rising 2.9% annually, the BLS data showed.

"For the Federal Reserve, inflation is much further from its target than the unemployment rate, which is why we expect them to hold off rate cuts another few months," according to Pearce. "However, another weak set of jobs data in August would force their hand early."

At the beginning of the month, the BLS reported that the world's largest economy added fewer jobs than projected in July, while gains in the previous two months were revised down sharply. The report prompted President Donald Trump to fire BLS Commissioner Erika McEntarfer, saying on social media that the numbers were "rigged."

Trump on Monday nominated E. J. Antoni, chief economist at the Heritage Foundation, as the BLS' next chief commissioner.

"With the policy rate still well in restrictive territory and inflation expectations remaining well anchored, the prudent move for the Fed is to prioritize the employment side of its dual mandate and provide some rate relief in the months ahead," TD Economics Senior Economist Thomas Feltmate said in a separate note.

Markets are widely expecting the Federal Open Market Committee to lower its benchmark lending rate by 25 basis points in September, according to the CME FedWatch tool.

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