The all-items Consumer Price Index (CPI), which includes food and energy, rose just 0.07% in July from June after a decline in the prior month. At that monthly pace, headline inflation would annualize to under 1%, well below the Federal Reserve's 2% target. The “core” CPI, which excludes food and energy, increased 0.22% after a negative reading in the previous month, an annualized rate of roughly 2.6%. The core services CPI rose 0.23%, a category Federal Reserve officials watch closely as a gauge of underlying and persistent inflationary pressure, according to data released today by the Bureau of Labor Statistics.

Several large month-to-month declines helped hold down the headline readings.

The CPI for hotels and motels fell 3.3% in July from June, after dropping 2.8% in June from May. That decline pulled down the core services CPI, the core CPI, and the all-items CPI. It also kept the CPI for “shelter” nearly flat at 0.1%. Shelter accounts for 35% of total CPI, making it the single largest component and a key driver of the overall index. Even so, the CPI for rent rose 0.3% and the CPI for owners’ equivalent rent rose 0.3%, both faster than in June.

Motor vehicle insurance also declined, falling 0.3% in July after sharp drops in the prior two months. Despite the recent pullback, it remains up by about 50% since January 2022, one of the largest cumulative increases of any major CPI category during that period. The drop in motor vehicle insurance also weighed on the core services CPI, the core CPI, and the all-items CPI.

Energy prices were another major drag. The CPI for gasoline plunged 2.9% in July from June after already falling in June from earlier spikes. Gasoline accounts for about half of the overall energy CPI. Electricity prices edged higher, and utility natural gas jumped. Even so, the energy CPI fell 1.5% in July from June, which helped push down the all-items CPI.

Food prices were mixed, but grocery costs eased slightly. The CPI for “food at home” fell 0.1% in July from June, led by declines in beef (-0.8%), pork (-1.5%), and chicken (-0.7%). Pork chops fell 2.8%, fresh whole chicken declined 0.8%, and egg prices slipped 0.5%, continuing their decline from a spike through March 2025. The CPI for roasted coffee fell 0.4% for the second straight month. Coffee futures, which affect retail prices later, have dropped 23% since their peak in November.

Some food categories still rose. Prices of fish and a number of other grocery items increased, making the picture mixed overall. Still, the small increase in food at home helped hold down the all-items CPI.

Inflation remained more evident in other categories.

Consumer electronics were lifted by the AI boom, with prices rising for items containing many semiconductors. In July from June, the CPI for computers and peripherals increased 3.5%, smartphones rose 1.1%, TVs climbed 1.7%, and other video equipment gained 2.1%. These gains are notable because consumer electronics prices had been in a multi-year downtrend before recent semiconductor-driven increases.

The CPI for “food away from home” rose 0.3% in July from June, near the high end of its recent range. This category covers restaurants, delis, cafeterias, and similar establishments.

Motor vehicle-related inflation also stayed firm. The used vehicle CPI rose 0.4%, the fastest pace in four months. The CPI for motor vehicle parts and equipment jumped 0.6%, and the CPI for auto maintenance and repairs also rose 0.6%, following large increases in the previous two months. The CPI for new vehicles edged up only 0.1%.

Medical care services registered a 0.6% increase, the biggest monthly gain in months.

On a year-over-year basis, the all-items CPI rose 3.4% in July, a slight slowdown from the previous month and still above the Federal Reserve's 2% target, which is formally based on the separate Personal Consumption Expenditures price index. Since January 2020, the all-items CPI has increased 30%.

The core CPI rose 2.5% year-over-year, also a slight deceleration. Since January 2020, the core CPI has increased 27%.

The core services CPI rose 3.1% year-over-year, slowing from the prior month. Since January 2020, it has risen 30%.

Within core services, the two largest components moved as follows: rent increased 0.3% month-to-month and 2.9% year-over-year, both faster than in the prior month; owners’ equivalent rent rose 0.3% month-to-month and 3.2% year-over-year, roughly in line with June.

The core goods CPI, which excludes food and energy goods, rose 0.2% in July from June. Year-over-year, it increased 0.8%, about the same pace as in June. Since January 2020, the core goods CPI has risen 16%.

The CPI for food at home fell 0.07% in July from June. Year-over-year, it rose 2.7%. Since January 2020, it has increased 32%.

The energy CPI fell 1.5% in July from June, driven by the drop in gasoline prices even as electricity and utility natural gas rose. Year-over-year, the energy CPI was still up 14.4%. Since January 2020, it has climbed 43%.