Inflation Finally Starts To Cool

The annual rate of inflation slowed to 8.5% in July

A woman using her smartphone to pay for some groceries at her local supermarket.

Tom Werner / Getty Images

Finally, U.S. consumers have a reason to cheer: Inflation is starting to cool off as the Consumer Price Index (CPI) rose by 8.5% in July since last year, slowing down from a red hot 9.1% in June, according to the Bureau of Labor Statistics (BLS). While the annual rate of inflation remains close to 40-year highs, the jump in prices was also lower than economists had originally forecast.

Key Takeaways

  • Annual inflation slowed to 8.5% in July, down from 9.1% in June.
  • The Consumer Price Index (CPI) was unchanged in July from June on a monthly basis.
  • The drop in inflation was fueled by a dramatic decline in gas prices.

Why It Matters

Inflation has been hammering consumers, as they have been forced to shell out more money on necessities like groceries and clothing as the prices of most goods and services continue to rise. 

And those persistently high levels of inflation have put pressure on the Federal Reserve to bring down prices through a series of interest rate hikes

While higher interest rates should help break the inflation fever, they also make loans more expensive, which may dampen your plans to buy a house, a car, or with credit card debt. Over one-third of U.S. adults say they are reconsidering major milestones such as buying a house or buying a car because of inflation, a new survey by The Balance found.

Going Deeper

When more volatile prices of gasoline and food were excluded, the “core” CPI rose 0.3% in July from the month prior. That’s lower than the 0.5% economists expected. Gas prices dropped 7.7% last month, bringing relief to drivers who have been getting squeezed at the pump. Food prices continued to rise, jumping 1.1% last month over June. 

It’s unclear whether inflation will continue to slow down as the central bank remains committed in its fight against rising prices. Policymakers at the Federal Reserve have continued to remain hawkish (meaning, willing to raise interest rates) and have made statements signaling they would do what it takes to bring inflation down, in line with their goal of 2%—so we still have a long way to go.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. U.S. Bureau of Labor Statistics. “12-month percentage change, Consumer Price Index, selected categories.

  2. U.S. Bureau of Labor Statistics. “Consumer Price Index Summary.”

  3. Board of Governors of The Federal Reserve System. “Federal Reserve issues FOMC statement.”

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