US Inflation Rate Holds Steady in July, Despite Expectations

Strategic Insights -

The US inflation rate held steady in July, with the Consumer Price Index (CPI) rising 2.7% compared to the year before. This is despite forecasts that President Donald Trump's tariffs would have a larger impact on consumer prices. The data released by the Labor Department on Tuesday showed that core CPI, which strips out volatile food and energy prices, heated up to 3.1% year-over-year. This is above expectations of a 3% pace and higher than its 2.9% reading from June.

Key Takeaways:

  • The CPI rose 2.7% in July compared to the year before, remaining flat from June.
  • Core CPI, which strips out volatile food and energy prices, heated up to 3.1% year-over-year.
  • Prices for takeout and restaurants jumped up 3.9% over the last year, pushing up overall food prices by 2.9%.
  • Prices for used cars, housing, and medical care also jumped up higher than the overall rate.
  • Overall energy prices were down 1.6% for the year, which probably stabilized the overall pace of inflation.
  • Economists say that it takes time for tariffs to show up in consumer prices, but recent data indicates that businesses have begun passing these costs on to consumers.
  • US businesses have been bearing around 64% of the hit from Trump's tariffs, according to Goldman Sachs economists.
  • The recent surge in prices indicates that businesses have reached a point of no return where they are forced to pass additional tax costs along to the consumer in the form of price hikes.

Statistics:

  • CPI rose 2.7% in July compared to the year before.
  • Core CPI heated up to 3.1% year-over-year.
  • Prices for takeout and restaurants jumped up 3.9% over the last year.
  • Overall energy prices were down 1.6% for the year.
  • US businesses have been bearing around 64% of the hit from Trump's tariffs.

Sources:

  • Guardian
  • Labor Department
  • PNC Financial Services Group
  • Goldman Sachs economists
  • CNN
  • Times Content