Inflation eases in July as gasoline and grocery prices fall

The Labor Department reported consumer prices up 3.4% year-over-year in July, a smaller annual increase than May or June, with prices rising just 0.1% month-over-month. Falling gasoline and grocery prices offset increases in rents and airfares.

Lettuce prices dropped more than 16% after a food-borne illness outbreak forced a recall of iceberg lettuce from Mexico, pushing retailers to discount other varieties. Gasoline also fell, though it remains over a dollar more per gallon than before tanker traffic snarled in the Strait of Hormuz.

Core inflation, stripping out food and energy, eased to 2.5% from 2.6% in June. Investors now peg the odds of a September rate cut lower, near 40%, though another inflation report arrives before the Fed's next meeting.

The full dispatch is available from the source below.