The Consumer Price Index climbed 8.5 percent in the year through July, compared with 9.1 percent the prior month. In July, gas prices and airfares fell, a welcome reprieve for consumers and economic policymakers but not yet a conclusive sign that price increases are turning a corner.

On a monthly basis, the price index did not move at all in July. That’s because fuel prices, airfares and used cars declined in price, offsetting increases in rent and food costs.Core inflation was also slower than economists had expected. In June, that figure was 0.7 percent.

Consumer Price Index inflation cooled meaningfully in July as gas prices declined. The decline owed in large part to gas prices, and they can always jump again. There are some real reasons to believe inflation will slow in the months ahead. But there are also reasons to worry. Wage growth remains rapid. And housing costs, particularly rents, continue to climb.

A big chunk of the pullback in July came from dropping gas prices. The average cost of a gallon of fuel began to fall back toward $4 after peaking at $5 in June. The slowdown in core prices, which strip out volatile food and fuel costs, was more pronounced than economists had expected.

The Fed raised interest rates by three-quarters of a percentage point in both June and July. Officials have signaled that another one of those abnormally large increases should be up for debate at their upcoming meeting on Sept. 20-21. Rapidly rising rents are likely to particularly stick out to the Fed, because they make up a big chunk of overall inflation.
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