US inflation decelerated in July by more than expected, reflecting lower energy prices, which may take some pressure off the Federal Reserve to continue aggressively hiking interest rates.
The consumer price index increased 8.5% from a year earlier, cooling from the 9.1% June advance that was the largest in four decades, Labor Department data showed Wednesday. Prices were unchanged from the prior month. A decline in gasoline offset increases in food and shelter costs.
The CPI, which strips out the more volatile food and energy components, rose 0.3% from June and 5.9% from a year ago.
However, annual inflation remains high at more than 8%, and food costs continue to rise, providing little relief for President Joe Biden and the Democrats ahead of the midterm elections.
Gasoline prices fell 7.7% in July, the most since April 2020, after rising 11.2% a month earlier. Utility prices fell 3.6% from June, the most since May 2009.
Food costs, however, climbed 10.9% from a year ago, the most since 1979. Used car prices decreased.
US stocks jumped in response, with the benchmark S&P 500 up 1.7 per cent in early New York trading. The Nasdaq Composite, which comprises tech shares that are more sensitive to changes in interest rate expectations, leapt 2.2 per cent.
US government bonds also rallied, with the yield on the 10-year Treasury note — a proxy for borrowing costs worldwide — was down 0.07 percentage points to 2.73 per cent.