The Latest Inflation Results Are Not Surprising.

The Bureau of Labor Statistics released its inflation data for the month of July on Wednesday. The overall Consumer Price Index (CPI) increased by 0.1 percent (seasonally adjusted) from the previous month.

However, prices are still up by 3.4 percent from the previous year.

Energy prices, especially from fuel, are driving the largest increases in prices year-to-date. The war in Iran is continuing to drive up oil prices as the number of ships passing through the Strait of Hormuz remains throttled. However, energy prices did decrease by 1.5 percent in July in addition to the 5.7 percent decrease in June.

The food index increased by only 0.1 percent in July, and food at home actually decreased by 0.1 percent. The reduction was driven by meats, poultry, fish, and eggs (down 0.7 percent) and pork (down 1.5 percent). Fuel costs are an important part of the food index as transportation accounts for a significant portion of costs. Beef costs have been rising in recent years as costs for producers have risen and cattle stocks have declined to a 75-year low.

Used cars and trucks, medical commodities, and dairy and related products have actually fallen since last year. Rent, transportation, and medical care all have risen by nearly 3% since last year.

Inflation continues to be a top priority for the Fed, which is weighing inflation risks against job stability and growth. Interest rates are likely to remain steady as long as inflation is elevated above the target of 2%.