Inflation drops to zero in July due to falling gas prices


Consumer prices were unchanged in July, as plunging prices for gasoline dragged the Consumer Price Index down to zero. Core inflation, which excludes energy and food, rose only 0.3%, below what analysts expected.

Driving the news: The Labor Department reported that overall consumer prices rose 0% last month, and are up 8.5% over the past year. That compares to a 9.1% year-over-year reported in June.

Why it matters: Falling gasoline prices are clearly giving American consumers some inflation relief, and the broader inflation picture was more favorable in July than economists had expected.

By the numbers: Gasoline prices fell 7.7% in July, dragging down headline inflation. Other items with falling prices included used cars and trucks (-0.4%) and airfares (down 7.8%).

  • But rents kept rising, a major factor in stubbornly high underlying inflation. Renters faced a 0.7% rise in costs.

What’s next: The Federal Reserve has indicated it intends to keep raising interest rates until there is clear evidence inflation is waning. After two straight months of extremely hot inflation readings, this report will be welcome news.

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