Inflation Eases But Remains Well Above Pre-War Levels

Inflation in the United States continued to ease last month, as energy prices moderated slightly amid hopes of a resolution of the Iran conflict. The all-items Consumer Price Index rose 0.1 percent from June to July, with the index for shelter accounting for two thirds of the monthly increase. Headline inflation, i.e. the year-over-year change in the all-items index, fell slightly to 3.4 percent, down from 3.5 percent in June and 4.2 percent in May. That is still considerably higher than the last pre-war readings, however, when inflation had eased to 2.4 percent in February 2026.

Energy prices continue to be the main driver of inflation, as the price index for energy commodities increased 24.7 percent year-over-year in July. Core inflation, which excludes food and energy prices, fell to 2.5 percent last month, the joint lowest reading since the inflation crisis began in 2021.

According to the Bureau of Labor Statistics, the price index for gasoline fell 2.1 percent in July, following a 9.7-percent decline in May. Prices are still up 33 percent from February, however - the last month before global oil prices surged due to the conflict in Iran.