US inflation eases as food and fuel costs cool

An important development from the financial markets: US inflation eases as food and fuel costs coolImage source, Getty ImagesByFrancisco VelasquezBusiness reporter, Reporting fromNew YorkPublished12 August 2026US prices rose 3. 4% in the year to July, slightly lower than the 3. 5% in the year to June, new figures show.

Energy remained volatile as the Middle East conflict has continued. While gasoline prices were down 2. 9% in July compared to June, they were up 24.

Economic Details

Month to month, inflation rose 0. 1%, mainly due to an increase in housing costs, the Bureau of Labor Statistics said. Even small moves in rent can lift the overall headline figure as it makes up a large share of household spending.

Food prices rose only slightly in July and at a slower rate than in June, while energy prices fell, offering some relief for consumers. While inflation was slightly lower in July compared to June, those figures show prices are rising more slowly rather than falling. Prices excluding food and energy rose 0.

2% after staying flat in June, with medical care and airline tickets edging higher and car insurance continuing to fall. The new Federal Reserve chair, Kevin Warsh, has said the central bank's priority is to "keep inflation moving down" while avoiding unnecessary shocks to the economy. In a recent press briefing, Warsh said the Fed cannot use a "magic wand" to undo years of above-target inflation and must stay patient as price growth cools gradually.

Analyst Views

One of the Fed's key jobs is to keep inflation near 2%, a level policymakers say keeps prices stable, supports steady economic growth, and helps prevent deeper downturns. President Donald Trump has also said inflation is still too high for many families, pointing to rent and grocery bills as signs that the cost of living remains a major concern. Financial markets reacted calmly to the latest figures, with stocks little changed as the numbers were broadly in line with market expectations.

Chris Zaccarelli, chief investment officer at Northlight Asset Management, said the figures were “no big surprise" and that inflation is not "reaccelerating". Recent labour market concerns have also softened expectations for a rate increase, after July's report showed a loss of jobs. Taken together, the two reports “give the Fed more time to wait", Zaccarelli added.

Meanwhile, Jeffrey Roach, chief economist at LPL Financial, said inflation is on a “real decelerating course", noting that July’s drop in energy prices “helped soften the inflation pressures of the month". Bill Adams, chief US economist at Fifth Third Commercial Bank, said the report “keeps a narrow path open for the Fed to hold rates steady in September".

Financial markets are tracking the development closely as investors assess the likely impact.