Consumer prices rose 8.5% in July, less than expected as inflation pressures ease a bit

The prices that consumers pay for a variety of goods and services rose 8.5% in July from a year ago, a slower pace from the previous month due to a drop in gasoline prices.

Energy prices fell 4.6% and gasoline fell 7.7% on a monthly basis. The food and shelter costs went up, but that was offset by a 1%) monthly gain in food prices.

The economists were expecting a 8.7% increase in the headline inflation rate.

Excluding volatile food and energy prices, the core consumer price index rose 5.9% annually and 0.3% monthly.

Inflation pressures were still strong even with the lower-than- expected numbers.

The 12-month increase was the fastest since May 1979. Electricity prices rose 1.6% even though the energy index fell. The energy index increased from a year earlier.

Air fares fell 1.8% for the month and 7.8% for the year as used vehicle prices posted a 0.4% monthly decline.

The markets reacted positively to the report, with futures tied to the DJIA up more than 400 points and government bond yields down sharply.

Shelter costs continue to rise and are up 5.7% from a year ago

The numbers show that inflation pressures are not as high as they have been in the past.

Complicated supply chains, outsized demand for goods over services, and trillions of dollars in fiscal and monetaryStimulus have combined to create an environment of high prices and slow economic growth.

After prices at the pump rose past $5 a gallon, July's drop in gas prices provided some hope. Fuel oil has increased on an annual basis despite a decline in July.

The Federal Reserve is trying to beat back inflation numbers by using a recipe of interest rate increases and monetary policy tightening. The central bank has hiked benchmark borrowing rates by 2.25 percentage points in the last two years, and officials have said that more increases are coming.

According to a New York Fed survey, consumers have reduced their inflation expectations. The rising cost of living is a problem.

The GDP declined for the first two quarters of the year. Stagflation is associated with slow growth and rising prices, while the two quarters of negative GDP meet the definition of a recession.

The inflation numbers could help the Fed.

The September meeting is likely to see a third 0.75 percentage point interest rate hike in a row. Market pricing reversed after the report and traders are now expecting a less significant move.

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