Consumer prices in the United States rose 3.7% in July compared with a year earlier, unchanged from the prior month, the Commerce Department reported on Wednesday. The figure sits well above the Federal Reserve’s 2% target and points to persistent cost pressures on American households.
The personal consumption expenditures index, the Fed’s preferred inflation gauge, came in above forecasts on the headline measure. Core inflation, which excludes food and energy, held steady at 3.3%, matching expectations.
On a monthly basis, overall prices climbed 0.2% from June to July, following a 0.1% decline in the previous month and a 0.5% jump in May. Core prices also advanced 0.2% month-on-month, up from 0.1% in June. Some Fed officials have described monthly core readings near 0.2% as consistent with a return toward the 2% goal.
Inflation has worsened since the Iran war began in late February, when the annual rate stood at 2.9%. The conflict has kept gasoline prices elevated, and gas costs rebounded again this month, a trend likely to lift the August figures.
Separately, the government left second-quarter gross domestic product growth unrevised at 1.5%, confirming an earlier estimate of moderate expansion.
Several forces are pushing on prices at once. President Donald Trump has threatened new tariffs on Canada and China, while spending on artificial intelligence infrastructure has raised the cost of computers, gaming consoles, and semiconductors. Earlier consumer price readings this summer had shown inflation running lower before the recent acceleration.
Stubbornly high prices are shaping up as a central issue ahead of the midterm elections. The combination of war-driven fuel costs, trade disputes, and technology-sector demand has left many households facing higher expenses across categories.
The data is unlikely to resolve a division inside the Federal Reserve. Most officials favor holding interest rates steady to see whether inflation cools on its own. Others have supported raising rates to slow borrowing and spending.
New Fed Chair Kevin Warsh is scheduled to deliver a speech Friday in Jackson Hole, Wyoming. Wall Street will watch closely for any indication of his approach to the central bank’s next move.