Falling grocery prices helped to keep inflation in check last month. Lettuce prices dropped sharply in July after an outbreak of food-borne illness prompted a recall of some leafy greens.
Justin Sullivan/Getty Images North America
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Justin Sullivan/Getty Images North America
Last month saw a slight cooling in inflation as the costs of gasoline and groceries declined.
According to a report from the Labor Department released Wednesday, consumer prices in July increased by 3.4% over the previous year, marking a smaller rise compared to May and June.
Between June and July, prices edged up just 0.1%, following a 0.4% drop from May to June. Although rents and airfares increased, this was counterbalanced by decreases in gasoline and grocery prices.
Lettuce prices plummeted over 16% in July due to a food-borne illness outbreak that led to a recall of iceberg lettuce from Mexico. Retailers responded by offering significant discounts on other lettuce types to attract concerned shoppers.
Gasoline prices also fell in July, though the average price of regular gas remains more than a dollar above the pre-war level, when tensions with Iran disrupted tanker traffic in the Strait of Hormuz, as noted by AAA.
Excluding the unpredictable food and energy prices, “core inflation” was at 2.5% for the year ending in July, a slight decrease from June’s 2.6%. This easing in inflation is likely to be welcomed by the Federal Reserve, which has committed to managing price increases.
Investors speculate that the relatively moderate inflation figures might reduce the likelihood of the central bank raising interest rates in their upcoming meeting.
Following the cost-of-living report released Wednesday, the market odds of a September rate hike dropped to about 40%. However, another inflation report is expected before policymakers convene next month.
