Despite the ongoing war with Iran, U.S. inflation continued to cool in July, the monthly Bureau of Labor Statistics report released Wednesday shows.
After posting a 0.4% month-to-month decline in June, the seasonally-adjusted Consumer Price Index (CPI) increased 0.1% in July. With the exception of June, July’s increase was the smallest monthly rise since May of 2025, which was also 0.1%.
The index for shelter rose 0.1% in July, accounting for roughly two-thirds of the monthly all items increase. The index for food also increased 0.1% over the month. Compared to July of 2025, the CPI was up 3.4%, cooling from June’s 3.5% 12-month increase.
The so-called “core” index, which excludes volatile food and energy products, rose 0.2% after remaining unchanged in June. Compared to year-ago, the core index rose 2.5%, less than June’s 2.6% rise.
The energy index declined 1.5% in July after shrinking 5.7% in June. Gasoline prices declined 2.9%, after falling 9.5% in June.
Put into perspective, July’s numbers have the CPI continuing to defy predictions by media analysts that the war to end Iran’s nuclear ambitions would send inflation soaring.
Over the five months that the U.S. has been at war with Iran (March-July), annual inflation averaged 3.6% during the second year of the current Trump Administration.
In contrast, during the same five-month period of President Joe Biden’s second year in office, when the U.S. was not at war, inflation averaged 8.6%.
On a monthly basis, annual inflation averaged 1.9% during Trump’s first term (Feb. 2017-Jan. 2021), compared to 5.0% under Biden (Feb. 2021-Jan. 2025).
July’s modest inflation suggests the Federal Reserve will continue to leave interest rates unchanged, Morgan Stanley Wealth Management Chief Economic Strategist Ellen Zentner told Fox News:
"In-line inflation will keep the ‘no need to hike rates’ narrative that took hold after last week's jobs report intact.”
