July’s annual inflation rate accelerates after 0.4% dip in June

Aug. 12 (UPI) — The annual rate of inflation began to accelerate again in July after slowing in June, the U.S. Bureau of Labor Statistics reported on Wednesday.

The Consumer Price Index increased by a seasonally adjusted 0.1% in July, reaching an annual rate of 3.4%. The index fell by 0.4% in June as the United States and Iran neared a peace agreement that ultimately fell apart.

The index excluding volatile food and energy, known as core inflation, increased by 0.2%, matching the rate increase in June. The increase falls in line with the Dow Jones consensus estimate.

Energy prices have been a driving factor in accelerating inflation, particularly since the United States and Israel launched attacks on Iran on Feb. 28. The annual energy index for the 12 months ending in July climbed by 14.7% while the food index rose 3%.

For the month, the energy index fell by 1.5%, a slower rate than the 5.7% decrease in June. Gasoline marked the largest index decline for energy products, down 2.9%. Meanwhile, the index for natural gas increased by 4.3%.

Three of the six key grocery store categories notched decreases in July. The meats, poultry, fish and eggs category decreased by 0.7%; pork fell 1.5% and the index for fruits and vegetables went down 0.1% for the month. Overall food increased by 0.1%.

The CPI is a key reading monitored by the Federal Reserve as it navigates monetary policy in the hopes of taming inflation. July’s annual 3.4% rate of inflation is much higher than the Fed’s target rate of 2% but the spikes in energy prices in the first months of the Iran war have cooled slightly.

The Federal Open Market Committee will next meet in September. The committee has held its target interest rate between 3.5% and 3.75%. During its July meeting, members voted 9-3 in favor of maintaining that target interest rate with three members voting for an increase.