US inflation cools to 3.4% in July, easing Fed pressure

US consumer prices rose 3.4% in July from a year earlier, down from 3.5% in June, matching analyst expectations and easing pressure on the Federal Reserve to raise interest rates at its September meeting Source: Portafolio. Core inflation, which excludes volatile food and energy prices, also cooled to 2.5% annually, its lowest since March 2021 Source: La República. Monthly, overall prices rose 0.1%, while core prices rose 0.2% Source: Infobae.

Drivers

Energy prices fell 1.5% in July, following a 5.7% drop in June, helping to moderate the headline figure, though energy costs remain 14.7% higher than a year ago Source: Infobae. Housing costs rose 0.1% and accounted for about two-thirds of the monthly increase Source: La República. Food prices also rose 0.1% Source: Infobae.

Fed outlook

The data gives the Fed room to hold rates steady in the 3.5%–3.75% range at its September 15–16 meeting Source: La Vanguardia. Market expectations for a rate hike fell to 42%, according to CME FedWatch Source: La Vanguardia. However, three of twelve Fed voters had already called for a hike in July, and some analysts note that inflation remains above the Fed's 2% target Source: La Vanguardia.

Political reaction

White House spokesman Kush Desai celebrated the figures as proof that President Trump's economic policies are working Source: Portafolio. The report comes amid ongoing tensions with Iran, which had pushed inflation to 4.2% in May Source: Infobae.