Consumer prices rose slower than expected in July

July’s inflation cooled slightly, according to the Bureau of Labor Statistics (BLS) report released Tuesday. The consumer price index (CPI) rose a modest 0.2% for the month and 2.7% year over year, slightly below expectations of 2.8%.

However, core CPI, excluding food and energy, increased 0.3%—the largest monthly gain since January.

During the period, footwear prices rose 1.4%, outdoor equipment 2.2%, furniture 0.9%, and linens 1.2%.

Used car and truck prices climbed 0.5%, while transportation and medical care services each rose 0.8%. Appliance and energy prices fell 0.9% and 1.1% respectively. 

Economists say President Donald Trump’s tariffs have had a mixed effect. Their effects remain gradual due to companies stockpiling before the levies could hit.

Several retailers are also absorbing the tariff costs instead of passing them to the customers, but economists warn this relief won’t last.

The biggest inflation driver remains services, particularly housing, though shelter costs, like rents, have cooled to their lowest annual gain since October 2021.

Markets rallied on the data as investors grew more confident that the Federal Reserve would cut interest rates in September.

The CPI report lands amid political turmoil at the BLS, which has faced staffing cuts, halted data collection in some cities, and criticism from President Trump, who recently replaced its commissioner.