US inflation cooled slightly to 3.4% in July, according to latest data

In July, the annualized inflation rate in the United States dropped to 3.4%, according to the latest data. Gasoline prices are still about $0.85 higher than they were before the Iran war, while energy prices have decreased slightly compared to the previous month. Gasoline is currently averaging $4 a gallon at the pump, which is nearly $0.85 higher than a year ago.

Despite the cooling inflation, prices remain higher than before the war with Iran. Food and service prices, including shelter, transportation, and medical care, have risen by 3% each compared to last year. However, grocery prices have dropped slightly, with lettuce being 16% cheaper than a year ago. The price of Brent crude oil, the international benchmark for oil prices, fell in June when the US and Iran reached a peace agreement.

However, prices rose again when the deal collapsed in July. The latest negotiations to end the war and reopen the Hormuz Strait, a vital waterway for global oil trade, have reached a stalemate. The recent jobs report also showed a sharp drop in American employment, with employers unexpectedly losing 23,000 jobs in July. Additionally, wage gains for hourly employees decreased by 0.2% after adjusting for inflation.

The Federal Reserve is currently deciding whether to raise interest rates to combat persistent inflation. Fed officials voted 9-3 to maintain rates, marking the first time in a decade that three board members disagreed on a policy decision. The latest inflation data is likely to reduce pressure on the Fed to increase rates. Fed Chair Kevin Warsh has pledged to deliver price stability and bring inflation down to the Fed's target of 2%.

While interest rates could be part of the solution, Warsh has ruled out using them "in isolation." Some bank presidents have been pushing for rate hikes, as inflation continues to rise too rapidly.