Navigating the Latest CPI Report: A Comprehensive Guide to Understanding July's Inflation Numbers

Core CPI at a 2.5% annual rate.

The Bureau of Labor Statistics reported that the Consumer Price Index increased 3.4% in July from year-ago levels after increasing 3.5% in June. Year-over-year core CPI (which excludes volatile food and energy costs) rose 2.5%, lagging the June rate of 2.6%. Overall inflation rose 0.1% month over month after falling 0.4% in June. Core inflation rose 0.2%, matching the June decrease.

Economists had expected CPI to rise 0.1% month over month and 3.4% year over year in July, according to consensus FactSet estimates. Core CPI was expected to come in up 0.2% month over month and up 2.5% year over year.

Food prices increased 0.1% in July after increasing 0.2% in June. Grocery prices fell 0.1%, while restaurant prices increased 0.3%. Overall energy prices decreased 1.5% after falling 5.7% last month, while utility gas prices rose 0.7%, fuel oil prices decreased 1.7%, gasoline prices fell 2.9%, and electricity prices increased 0.1%. Shelter prices rose 0.1% in July after rising 0.1% in June.

The Consumer Price Index is a mainstream measure of inflation that tracks changes in consumer prices for a variety of goods and services, including food, housing, healthcare, and energy.

Investors widely follow the CPI report, but it isn’t the only way to track inflation. When it comes to the Federal Reserve’s interest rate decisions, the focus is generally on the Personal Consumption Expenditures Price Index. The Fed targets a 2% inflation rate based on the PCE Index, not the CPI. However, the CPI generally makes front-page news because it is released earlier than the PCE and contains much of the same information. Both reports are released on a monthly cadence.

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