US inflation slows to 8.5% in July on lower energy prices

Further deceleration could take some urgency off Fed to extend outsize interest rate hikes

US inflation decelerated in July by more than expected, reflecting lower energy prices, which may take some pressure off the Federal Reserve to continue aggressively hiking interest rates.

The consumer price index (CPI) increased 8.5 per cent from a year earlier, cooling from the 9.1 per cent June advance that was the largest in four decades, Labour Department data showed yesterday.

Prices were unchanged from the previous month. A decline in petrol offset increases in food and shelter costs.

The so-called core CPI, which strips out the more volatile food and energy components, rose 0.3 per cent from June and 5.9 per cent from a year ago.

The core and overall measures came in below forecast.

The data may give the Fed some breathing room, and the cooling in petrol prices, as well as used cars, offers respite to consumers.

But annual inflation remains high at more than 8 per cent and food costs continue to rise, providing little relief for President Joe Biden and the Democrats ahead of mid-term elections.