The cost of housing, auto insurance, and food all increased from June, according to the U.S. Bureau of Labor Statistics, driving up the consumer price index by 0.2 percentage points.

However, the cost of some items, such as secondhand vehicles and airlines, decreased.

The annual rate increased from 2.97% last month—the lowest level since March 2021—to 3.18% in July. The inflation rate increased for the first time since late 2022.

Similar to May-June, core inflation, which does not include erratic food and energy prices, rose by 0.2% in July. The annualized rate was 4.7%, which was lower than in June and the lowest level since October 2021.

Traders on the futures market are placing bets that the Fed will maintain stable interest rates in September. An estimated 91% of times there will be a pause.

Overall inflation is getting close to the Fed’s 2% objective after reaching a peak of 9.1% last summer. The U.S. central bank is under pressure to maintain high interest rates for a longer period of time since core inflation is still persistently high.

The July report, including an improvement in core inflation, could ease pressure on the Fed to raise rates further this year.

The Fed has raised interest rates from nearly zero to a 22-year high of 5.25-5.5% in a year and a half. Fed Chairman Jay Powell said last month that the central bank will decide whether to raise rates further at each meeting.

What the Experts Say

“I view inflation as a potential headwind for economic growth, especially if it becomes entrenched. Investors should consider inflation-protected securities and assets that historically perform well during inflationary periods, such as commodities and certain equities. Prudent risk management is paramount.“, – Kathryn McCoach, Expert Writer.

“Inflation in the USA is a temporary phenomenon driven by pandemic-induced supply chain disruptions. As these disruptions normalize and pent-up demand subsides, we can expect inflation to moderate. The Federal Reserve’s prudent approach to interest rates will help steer us through these uncertain times.“, Sarah Thompson, Chief Economist at Global Finance Group.

“I believe inflation in the USA is a cause for concern. Rising consumer prices and the rapid increase in housing costs are signs that this is more than just transitory. The Federal Reserve should be prepared to take more aggressive action to prevent runaway inflation and protect the purchasing power of the dollar.”, John Reynolds, Wall Street Analyst at Capital Insights LLC.

“Inflation can present both challenges and opportunities for investors. While it erodes the real value of cash, it can benefit those holding assets like real estate and stocks. Diversification and active management of portfolios will be key to navigating this inflationary environment successfully.”, Anna Chen, Portfolio Manager at WealthWise Investments.“The current inflationary pressures are driven by a unique set of circumstances, including supply chain disruptions and fiscal stimulus. However, it’s crucial not to overreact. Investors should stay focused on their long-term goals and avoid making hasty decisions based solely on short-term inflation fears.”, David Rodriguez, Independent Financial Consultant.