July inflation eased up, despite recent energy shocks

July inflation eased up, despite recent energy shocks

Claire Boston · Senior Reporter

Wed, August 12, 2026 at 3:59 PM GMT+3 2 min read

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The latest inflation data showed price growth easing slightly in July, even as recent re-escalations 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 last year, and broader energy prices declined 1.5%.

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.

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

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 Tuesday, traders saw roughly 50-50 odds of a 25 basis point rate hike next month, according to CME FedWatch, 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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