Price hikes took a breather in July, fueling hopes that inflation has peaked

Martha C. White for CNN Business

(CNN) -- Runaway inflation took a breather in July, with consumer prices increasing by 8.5% year over year, a slower pace than the 9.1% increase in June, the Bureau of Labor Statistics reported Wednesday.

On a month-to-month basis, inflation was 0%, compared to the 1.3% increase in June. Prices began rising sharply in early 2021, with the rate of inflation almost doubling over the past year.

"I think inflation probably has peaked in year-over-year terms," said Bill Adams, chief economist at Comerica Bank.

Core inflation, which does not include volatile food and fuel components, was unchanged on a year-over-year basis after June's 5.9% jump.

Months' worth of increases in the Consumer Price Index, which covers a wide array of goods and services Americans buy, pose a growing challenge for the Federal Reserve, which has committed to reining in soaring prices while trying to avoid plunging the economy into a recession.

Energy costs slowed for the month of July, falling 4.6%, although they remained 32.9% higher than a year before. Gasoline prices dropped by 7.7% month over month, providing some relief for drivers, but they were still 44% higher than the year before.

However, food costs continue to jump sharply, increasing by 1.1% over the month and rising 10.9% on a year-over-year basis, the largest increase since May 1979. Food at home spiked by 13.1% on a year-over-year basis.

Price increases for new vehicles slowed a bit, rising 0.6% following last month's rise of 0.7%. Used car and truck prices ticked down by 0.4%, and airline fares dropped by 7.8%.

The rate of increase in housing costs also moderated slightly, with the rise in overall shelter costs, rent and owners' equivalent rent each down by a fraction of a percentage point from the previous month. However, shelter costs are still up 5.7% year over year.

This story is developing and will be updated.

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