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United States consumer inflation slowed slightly to 3.4 percent in July despite turbulent oil prices due to the Iran war, government data showed, with the figures likely giving the Federal Reserve room to breathe on interest rates.
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The consumer price index (CPI) rose 0.1 percent from a month earlier, but fell on a year-on-year basis, according to data released by the U.S. Bureau of Labor Statistics on Wednesday.
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July’s consumer inflation figures were in line with the expectations of economists polled by Dow Jones Newswires and the Wall Street Journal.
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U.S. households have been battered by more than five years of elevated prices since the pandemic hit, and the July data is still well above the Federal Reserve’s long-term two-percent target.
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Still, with last month’s inflation data also showing some easing in prices, the latest reading may give the central bank some room to manoeuvre ahead of potential rate hikes.
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U.S. President Donald Trump’s Republicans are facing a stern test in upcoming midterm elections, with Democrats seeking to wrest control of Congress over his handling of the world’s largest economy.
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Inflation has surged since Trump launched the war on Iran in late February, with Tehran’s retaliatory action virtually blocking the critical Strait of Hormuz through which a fifth of global energy supplies normally transit.
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Consumer inflation came in at 2.4 percent in February, before spiking to a three-year high of 4.2 percent in May.
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In July, energy prices continued to lead the line in terms of price increases, with gasoline prices — a sensitive political issue — up 24.6 percent from a year ago.
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Fuel oil, used by households for heating and in various industrial applications, was up 39.1 percent from the year before.
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Still, the energy index overall was 1.5 percent lower than a month ago, indicating a downward trajectory for prices of those commodities as talks to end the war continue.
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Core CPI, which excludes volatile food and energy prices, rose 2.5 percent from a year ago.
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