The Consumer Price Index climbed 8.5 percent in the year through July. That's a slower pace than economists had expected and considerably less than the 9.1 percent increase in June. Gas prices and airfares fell, a welcome reprieve for consumers and a positive development for policymakers.

After food and fuel costs are stripped out to better understand underlying cost pressures, prices climbed 5.9 percent, matching the previous reading. The slowdown in overall inflation stemmed from falling prices for gas, airfares, used cars and hotel rooms, which canceled out increases in critical areas like food and rent.

Inflation pressures remain unusually hot below the surface. Because the categories in which prices fell can be volatile, and because some of the goods and services that are rapidly increasing in price tend to be slower moving, the report’s underlying details suggest that inflation pressures continue to rise.

Food, energy, used cars, energy. food, energy                 +0.3   Used cars, trucks                 -0.4   Alcoholic beverages                 + 0.3    Tobacco, smoking products                 –0.2   Physicians’ services                   +0,3    All items                 –1.1   All items –1,1    Apparel                 –3.9   Utility gas service                 –7.7   Gasoline                 –9.6   Airline fares                 –11.0%.

The slower price increases are also likely to reassure the Federal Reserve. But central bankers are likely to see this as a first step in the right direction. The cost of many goods and services continued to pick up rapidly even as gas and travel-related price declines pulled overall inflation lower.
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