The July inflation report shows that consumer price growth in the U.S. has slowed to its lowest level since the pandemic, signaling that the inflation surge gripping the economy may be easing. The Consumer Price Index (CPI) grew by 2.9% over the past 12 months, down from 3% in June. This is the first time the CPI has dipped below 3% since March 2021. Month-over-month, the index rose by 0.2%, following a 0.1% decline in June.

This CPI report today adds to the mounting evidence that the rapid price increases experienced by consumers since the pandemic are beginning to abate. The July CPI report also intensifies pressure on the Federal Reserve to consider cutting interest rates as early as next month. Many categories have seen annual price increases slow to below the Fed’s 2% target, and some prices are even declining as businesses offer discounts to attract cost-conscious shoppers.
For example, prices for food-at-home, including groceries, saw minimal growth of 0.1% from June and increased by just 1.1% over the last year. Meat, poultry, and fish prices rose by 1.9% since July 2023, while milk prices increased by 1.2%. Some categories are experiencing price declines, such as used cars (-10.9%), airfares (-2.8%), and gasoline (-2.2%).
July CPI Report 2024
The July CPI data release today also coincides with reports from the New York Federal Reserve, which found that consumers’ three-year inflation outlook hit a record low. Additionally, a measure of wholesale price increases came in lower than expected. The bulk of the 22% inflation rise during the pandemic occurred between 2020 and 2022, with the index increasing by around 3.5% last year.
As consumers become more budget-conscious, many brands are noticing a shift toward more affordable options. For instance, Amazon CEO Andrew Jassy mentioned during the company’s earnings call that lower average selling prices were observed as customers opted for cheaper alternatives. This trend was also evident during Amazon’s Prime Day sales event, where a surge in discounts helped boost demand.
In response to these changes, companies like McDonald’s are extending deals, such as a recent $5 meal offer, to attract customers after price hikes negatively impacted foot traffic. Even airlines and hotels are reducing rates during the peak summer season, providing last-minute travelers with some of the best deals in years.
With the Federal Reserve’s meeting scheduled for September 17-18, the latest inflation report today has led investors to anticipate an interest rate cut, although opinions vary on the size of the cut. Last week, market expectations were leaning toward a significant half-percentage-point reduction, driven by concerns of a slowing economy following a weak jobs report. However, after the release of the CPI data today, the likelihood of a larger cut has decreased, with more investors now expecting a 25-basis-point reduction.
Economists suggest that the Fed’s interest rate hikes, initiated in spring 2022, have successfully curbed inflation by making borrowing more expensive, thereby reducing demand for goods and services. However, the cooling labor market, with the unemployment rate rising to 4.3% in July, may be impacting consumers more recently.
Wells Fargo economists believe that the Fed may consider inflation close enough to its target and begin a rate-cutting cycle at its next meeting. Nevertheless, other areas of the economy, such as housing costs, child care, and insurance, continue to experience significant price growth. Housing costs, in particular, have played a major role in keeping the overall CPI above 2%, making it challenging for many households to manage their expenses.
A recent Gallup poll found that 46% of respondents described current U.S. economic conditions as “poor,” marking the 29th consecutive month this sentiment has prevailed. Additionally, the New York Fed’s survey revealed that the proportion of respondents who feel “somewhat better off” financially has been declining for eight consecutive months.
Despite these challenges, there are signs of easing inflation thanks to factors like resetting annual insurance premiums, lower commodities prices, and slowing job growth. The central bank is now paying closer attention to the job market as it balances its dual mandate of stable prices and maximum employment.
The July CPI news indicates that the Federal Reserve has reason to be concerned about the softening labor market, which could influence its decision-making in the coming months. As the inflation report today shows, the path forward will likely involve careful consideration of both inflation trends and employment data.