U.S. inflation is forecast to cool for a second consecutive month in July, extending a retreat from the sharp acceleration recorded earlier this year as energy-related price pressures moderate.
The annual Consumer Price Index is projected to rise 3.4% in July, down from 3.5% in June. On a monthly basis, consumer prices are forecast to increase 0.1%, reversing part of June’s 0.4% decline.
The June decline was the largest monthly drop in the CPI since April 2020 and was driven primarily by a 5.7% decrease in the energy index, according to the U.S. Bureau of Labor Statistics. Annual inflation slowed to 3.5% from 4.2% in May.
Energy prices are expected to remain an important component of the July reading. Gasoline prices are projected to have fallen nearly 3%, while airfares and jet fuel costs are also expected to have declined. Prices for new and used vehicles could show modest increases.
Core inflation, which excludes food and energy, is forecast to increase 0.2% from June after remaining unchanged in the previous month. On an annual basis, core inflation is projected to ease to 2.5% from 2.6%, which would represent its lowest rate since February.
The July CPI report comes as the Federal Reserve assesses the trajectory of inflation alongside signs of softer conditions in the U.S. labor market. The data will provide another measure of whether the recent moderation in price growth is extending beyond the volatile energy component.
The U.S. Bureau of Labor Statistics reported that core prices were unchanged in June, while the 12-month core inflation rate slowed to 2.6% from 2.9% in May.
Source: U.S. Bureau of Labor Statistics; consensus forecasts.
