US inflation falls to 3.4% in July as food prices cool

U.S. consumer prices eased in July, with the annual inflation rate falling to 3.4%, according to the Labor Department’s Consumer Price Index report. The decline marks a modest improvement from June’s 3.5% pace and moves the figure closer to the Federal Reserve’s 2% target, though it remains above that benchmark. Food prices were a primary driver of the slowdown, registering a smaller year‑over‑year increase as grocery and restaurant costs moderated across the board.

Housing costs, however, continued to exert upward pressure on the overall index, with rents and owners’ equivalent rent rising at a steadier rate that offset some of the gains from lower food inflation. Core inflation, which excludes food and energy, stayed at 4.1% year over year, indicating persistent price pressures in services and other categories. Economists expect the trend to be closely watched by policymakers as they assess the timing of potential interest‑rate adjustments, while consumers remain sensitive to the mixed signals from housing and food price movements.