US inflation eases to 3.4% in July, Fed eyes rate hold
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- US inflation rose 3.4% year-over-year in July, down from 3.5% in June, while month-over-month prices ticked up just 0.1%, driven mainly by housing costs that carry outsized weight in the headline figure.
- Gasoline prices fell 2.9% month-over-month in July but were up 24.6% year-over-year, with the Bureau of Labor Statistics noting that energy remained volatile as the Middle East conflict continued.
- Core inflation (excluding food and energy) rose 0.2% in July after staying flat in June, with medical care and airline tickets edging higher and car insurance continuing to fall.
- Federal Reserve Chair Kevin Warsh said keeping inflation moving down is the central bank's priority, cautioning that the Fed cannot use a "magic wand" to undo years of above-target inflation and must stay patient.
- Financial markets reacted calmly to the report, with stocks little changed as the figures came in broadly in line with expectations.
- Economists Chris Zaccarelli, Jeffrey Roach, and Bill Adams said the report keeps a narrow path open for the Fed to hold rates steady in September, with Zaccarelli noting recent labor market concerns, including July's job loss, give the Fed "more time to wait."
- President Donald Trump said inflation remains too high for many families, pointing to rent and grocery bills as signs that the cost of living is still a major concern.
Why it matters: With core inflation still above the Fed's 2% target and July's job loss softening the labor picture, the data gives Chair Warsh's Fed cover to hold rates at its September meeting — a continuation of above-target price pressure that Trump has publicly flagged as a cost-of-living burden on households.
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