Inflation eases slightly in July but prices still outpacing wages

U.S. consumer prices rose 3.4% in July compared with a year earlier, down slightly from 3.5% in June, the Labor Department reported Wednesday. It was the second straight monthly decline after gas prices pushed inflation to a three-year high of 4.2% in May, though the rate remains well above the 2.4% level recorded before the U.S. attack on Iran. Prices rose just 0.1% from June to July.

Core inflation, which excludes food and energy, slipped to 2.5% from a year earlier, matching a post-pandemic low reached in January and February. Gasoline prices fell 2.9% from June to July but remain 25% higher than a year ago, with gas averaging $4.04 a gallon nationwide as of Wednesday, up 16 cents from a month earlier, according to AAA. Grocery prices dipped 0.1% for the month but are still up 2.7% over the past year.

Other costs rose: computer prices jumped 3.5% after Apple raised prices on computers and tablets amid rising AI-driven chip costs, airline fares climbed 2.2%, and services such as healthcare, restaurant meals and car maintenance rose 3% over the year. Paint maker Sherwin-Williams has said it plans an 8% price increase in September to offset higher raw material costs.

Some businesses continue to absorb tariff costs from earlier trade measures. Akron, Ohio-based guitar pedal maker Earthquaker Devices has paid $200,000 in tariffs this year and raised prices twice to cover the expense, according to its CEO. Federal Reserve officials remain divided over whether to raise interest rates further or hold steady as they assess whether the recent easing will continue.

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