US inflation cools slightly to 3.4pc in July

US consumer inflation decelerated marginally to 3.4% in July, according to government figures, despite volatile oil prices stemming from the Iran conflict, which could provide the Federal Reserve with breathing room for potential interest rate adjustments, the data suggested. The Consumer Price Index (CPI) increased by 0.1% compared to the previous month but exhibited a year-on-year decline.

July's inflation figures aligned with the projections of economists surveyed by Dow Jones Newswires and the Wall Street Journal. US consumers have endured more than five years of price surges since the onset of the pandemic, and despite this July's data showing some inflation easing, it still remains substantially higher than the Federal Reserve's two-percent long-term objective.

Nevertheless, the recent easing in inflation may afford the central bank some flexibility ahead of possible rate hikes. The inflation surge followed President Donald Trump's initiation of the Iran war in late February, as Iran retaliated, effectively blocking the crucial Strait of Hormuz, a vital route for a fifth of global energy supplies.

Consumer inflation was at 2.4% in February, before surging to a three-year peak of 4.2% in May. Energy prices continued to drive the inflation rate in July, with gasoline prices rising 24.6% year-on-year. Fuel oil, utilized by households for heating and industrial purposes, climbed 39.1% from the prior year. Yet, the energy index remained 1.5% lower than a month earlier, indicating a decreasing trend for these commodities' prices as negotiations to conclude the war persisted. Core CPI, which excludes volatile food and energy costs, climbed 2.5% from a year ago.