U.S. CPI rises 3.4% in July as gasoline gains slow

2026-08-12

Core excluding energy and food also slows

The U.S. Labor Department said on the 12th that the overall consumer price index (CPI) for July rose 3.4% from a year earlier. The increase narrowed by 0.1 point from June in line with market expectations, as gains in gasoline and other fuel prices slowed.

The core index, which excludes energy and food and is closely watched for signs of inflation, rose 2.5%, slowing from 2.6% in June. Both the headline and core readings saw their year-on-year gains narrow for a second straight month.

Gasoline and AI-related items lift prices

Gasoline prices were 24.6% higher than a year earlier, but the pace slowed from 26.7% in June. As hopes for a U.S.-Iran ceasefire faded in the first half of July, gasoline prices in the United States turned higher again. On a monthly average basis, however, July was lower than June.

The artificial intelligence (AI) boom showed up in prices as an inflation factor. Prices have been rising on tight supply and demand for high-tech products such as advanced semiconductors. Software and related equipment rose 21.2%, while computers and home smart devices gained 3.9%. Apple also may have pushed up July prices by raising the prices of its iPad tablet computers and Mac PCs by 20% to 30% in late June.

The Fed watches inflation and jobs

On a seasonally adjusted month-on-month basis, the headline index rose 0.1%. It fell in June, but turned higher again in July. The core index, which was flat in June, also rose 0.2%, indicating that the underlying pace of price increases continued on a month-on-month basis. The year-on-year pace has slowed, but remains elevated.

Recent gasoline prices have topped $4 per gallon, or about 4 liters, on average nationwide, surpassing a psychological threshold that consumers view as expensive. If uncertainty in the Middle East drags on, it could once again put upward pressure on prices.

The U.S. Federal Reserve decided at the late-July Federal Open Market Committee (FOMC) meeting to leave its policy rate unchanged, but three officials dissented in favor of a 0.25% rate hike. Some Fed officials also supported holding rates steady while saying they would back an increase if inflation shows no sign of easing. In the July employment report, nonfarm payrolls unexpectedly fell, quickly receding expectations for an early rate hike. With inflation still elevated, the Fed has entered a phase in which it is weighing risks to both prices and employment.

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