U.S. Consumer Price Index (July 2026)

Inflationary pressures remain subdued in July   

• The Consumer Price Index (CPI) rose by 0.1% month-on-month (m/m) in July – in line with expectations. On a twelve-month basis, CPI edged down to 3.4% (from 3.5% in June). 
  
  
  • Energy costs fell by 1.5% m/m, led by a 2.9% m/m decline in prices at the pump. Food prices rose 0.1% m/m – its softest gain in three-months – and are up 3.0% on a twelve-month basis.  
• Excluding food and energy, core prices rose 0.2% m/m, also meeting expectations. On a twelve-month basis, price growth down edged to 2.5% – returning to its February (pre-Iran conflict) pace.  

• Price growth on core services rose 0.2% m/m, following a flat reading the month prior. The rebound was driven by some firming in primary shelter costs (+0.3% m/m) and a rebound in non-housing services (+0.2% m/m vs. -0.4% m/m in June).  
  
  
  • Gains in the latter were driven by an acceleration in medical care (+0.6% m/m), education & communication services (+0.5% m/m) and airfares (+2.2% m/m).  
• Core goods rose 0.2% m/m, following modest declines in each of the two prior months. The categories that recorded the largest gains included education & communication (+1.3% m/m) – likely related to Apple's price hikes on computers and tablets – recreation goods (+0.6% m/m) and used vehicle prices (+0.4% m/m).  

Key Implications

• Despite the rebound in monthly measures, underlying inflation trends continue to move in the right direction. At 3.4%, headline CPI has put further distance from its four-year high reached in May, while the annual change on core inflation fell back to its pre-Iran conflict rate of growth. Near-term trends on core also improved, with the three-and-six-month annualized rates slipping to 1.6% (from 2.3%) and 2.4% (from 2.6%), respectively.  
• This morning's report offers policymakers more reassurance that tariff- and energy-driven inflation pressures are fading. Fed futures were little changed after the release, with a September hike still 40% priced. One more jobs and CPI report – plus Chair Warsh's Jackson Hole remarks on August 28 – will be key in steering the Fed's next move. But for now, it appears policymakers are likely to remain on the sidelines

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