US consumer price index holds at 3.7% in July, remaining above Federal Reserve target
The Commerce Department reported that overall inflation stayed at 3.7% year-over-year in July, while core inflation remained at 3.3%, keeping pressure on policymakers ahead of the midterm elections.
The Commerce Department said the Consumer Price Index rose 3.7% in July compared with a year earlier, matching June’s figure and staying well above the Federal Reserve’s 2% goal. Core inflation, which excludes food and energy, was unchanged at 3.3%.
The data arrive amid ongoing geopolitical tension after the United States and Israel’s strike on Iran, higher gasoline prices, and President Donald Trump’s proposed tariffs on Canada and China. Analysts note that these factors have helped keep price pressures elevated.
Federal Reserve officials remain divided on policy. While most members favor holding rates steady to assess whether inflation eases on its own, some have advocated for additional hikes to curb borrowing and spending. New Fed Chair Kevin Warsh is scheduled to speak at the Jackson Hole symposium on Friday, a session that markets will watch for clues on future monetary actions.
A separate government estimate showed the economy grew at a 1.5% annualized pace in the April-June quarter, slower than the 2.1% expansion recorded in the first quarter. Consumer spending, adjusted for inflation, was flat in July, and businesses continued to invest in artificial-intelligence infrastructure.
On a monthly basis, overall prices rose 0.2% from June to July, while core prices also increased 0.2%. Energy costs fell 2.7% and grocery prices slipped 0.1%, but vehicle prices rose 0.4% and housing and utility costs climbed 0.3%.
Real wages grew 0.4% in July, the strongest gain since February, but remain roughly in line with the year-over-year inflation rate. Gasoline prices rebounded to about $4.10 per gallon, a factor that could lift August inflation figures.
Higher inflation has contributed to rising long-term interest rates, affecting mortgages, auto loans and credit cards. Some Wall Street analysts attribute the upward pressure on rates partly to uncertainty about the Fed’s next steps, while Treasury Secretary Scott Bessent recently intervened after 30-year Treasury yields reached a 19-year high.