Consumer prices rise 3.4 percent in July as gas and grocery costs ease

Consumer prices in the United States rose more slowly in July, according to a Labor Department report released Wednesday and covered by NPR.

Prices were up 3.4 percent from a year earlier. That is a smaller annual increase than in May or June. From June to July, the Consumer Price Index rose just 0.1 percent after a 0.4 percent drop the prior month.

Gasoline and grocery costs fell and helped offset higher rents and airfares, NPR reported, citing the Labor Department data. Lettuce prices plunged more than 16 percent in July after a food-borne illness outbreak triggered a recall of iceberg lettuce from Mexico. Retailers discounted other lettuce varieties as shoppers grew cautious.

Gasoline also declined in July. Even so, AAA data cited by NPR showed the average price of regular gas remained more than a dollar a gallon higher than before the war with Iran disrupted tanker traffic in the Strait of Hormuz.

Core inflation, which strips out volatile food and energy prices, was 2.5 percent for the 12 months ending in July, down from 2.6 percent in June.

The cooler reading is welcome for the Federal Reserve, which has pledged to keep price increases under control. Market odds of a September rate hike fell to about 40 percent after the report, NPR said, though another inflation report is due before policymakers meet again.

For households on fixed incomes, slower price growth at the pump and in the produce aisle can ease pressure on monthly budgets. Rents remain a separate story. Housing costs continue to climb even when food and fuel cool, which is why core measures and shelter components still draw close attention from retirees and from Fed watchers.

The Labor Department will publish the next CPI update on its regular schedule. Investors and households will use that print, along with labor market data, to judge whether July was a one-month break or the start of a steadier cooling path.