According to the Labor Department, the rate of inflation was 3.2% in the year to July, led by rising housing, motor insurance, and food expenses.
This was an increase from the previous month’s rate of 3%, which was the lowest in more than two years.
Analysts predicted an uptick in the headline rate following relatively low price inflation in July.
However, the US Labor Department study provided additional evidence that price hikes were slowing.
“Underlying inflation is heading in the right direction,” HSBC Asset Management’s Hussain Mehdi said, while Harvard economist Jason Furman termed the latest statistics “unambiguously good news.”
The US Federal Reserve hiked its benchmark interest rate to more than 5.25%, the highest level in 22 years, in an effort to calm the economy and relieve price pressures.
Inflation in the United States peaked at 9.1% last year, considerably beyond the Federal Reserve’s 2% target.
However, it has reduced dramatically as the impact of the Ukraine war on food and energy costs has worn off.
According to Ryan Sweet, senior US economist at Oxford Economics, the drop does not suggest that the rate-setting central bank has completed its “mission.”
“However, we expect the Fed to forego rate increases in September and November, when inflation should have slowed even further,” he said.
Core prices increased by 0.2% in July compared to June. This was the same rate as in May and June.
Prices for other things, such as used vehicles and airline tickets, fell last month.
Many analysts predict housing expenses, which are significantly weighted in US inflation estimates, will begin to decline in the coming months, citing independent surveys showing a slowing in rental rate growth.
However, a recent increase in fuel prices may mean that inflation takes longer than expected to lessen its grip on the economy.
Despite being lower than a year ago, the average national price for regular gasoline in the United States surpassed $3.80 per gallon earlier in August, up from around $3.50 a month earlier, according to the motor club group AAA.
“The recent trend is encouraging and confirms that inflation is heading in the [Fed’s] desired direction,” said Sarah House, an economist at Wells Fargo. “That said, we’re wary of getting too excited.”
