Inflation eases off in July as the summer's breakneck price increases slow down

• The Consumer Price Index rose 0.5% in July, matching the median economist estimate.
• The print marks a slowing down from June's pace. Still, year-over-year price growth is the strongest since 2008.
• The Biden administration expects inflation to cool as supply chains heal and the economy normalizes.

Inflation slowed from its rapid pace in July, signaling faster price growth might prove temporary as most economists expect.

The Consumer Price Index - among the most popular US inflation yardsticks - rose 0.5% last month, the Bureau of Labor Statistics said Wednesday. The gauge tracks the prices of various goods and services and aims to measure how much everyday prices change each month.

Economists expected the measure to rise 0.5% month-over-month. The print marks a deceleration from the 0.9% gain seen the month prior and suggests price growth could soon return to its pre-crisis norm.

On a year-over-year basis, the index rose 5.4%, matching June's year-over-year rate. The one-year jump is the largest since July 2008.

Core CPI, which strips out volatile food and energy prices, gained 0.3% through July, falling short of the 0.4% estimate. The core measure is typically used to better gauge broad inflation and better anticipate its trajectory.

Prices climbed faster than usual through spring and summer as the reopening of the US economy powered a surge in spending. Americans unleashed billions in stimulus payments at a speed that left businesses struggling to keep up. That mismatch resulted in sharply stronger inflation as more buyers clamored over a limited number of goods.

Used vehicles were one of the clearest examples in past months, but the trend slowed sharply through July. Prices of used cars and trucks rose just 0.2% last month after gaining at least 7.3% in each of the previous three months. The slowdown was a "major factor" dragging on the core measure, BLS said.

"The details of the data release suggest some easing in the reopening and supply-shortage driven boost to prices, and tentatively suggests that inflation may have peaked," Seema Shah, chief strategist at Principal Global Investors, said. "Yet, while the data should reassure markets that inflation isn't on a relentless upward trend, make no mistake - this inflation report is still hot."

Prices at restaurants rose 0.8%, showing a pick-up from the pace seen in June. Gasoline prices climbed 2.4% and shelter inflation, which covers home and rental prices, rose 0.4%. The latter category counted for half of the core measure's increase, according to the report.

While inflation remains at elevated levels, recent trends suggest Americans aren't as worried as they were earlier in the recovery. Google searches for "inflation" and "hyperinflation" have fallen from their May highs, and inflation expectations have also moderated somewhat.

The easing of inflation fears is sure to be welcomed by the Biden administration. The White House has argued for months that price growth will moderate once supply bottlenecks are addressed and consumer spending cools. Republicans, on the other hand, have raised concerns that the US is hurtling toward an inflation crisis like that of the 1970s.

The print also aligns with the Federal Reserve's outlook that stronger inflation will be transitory, or impermanent, through the recovery. Fed Chair Jerome Powell reaffirmed in a July 28 press conference that inflation gauges remain in line with the central bank's target, and that recent increases were mostly powered by supply-chain issues and reopening.

Producers were "not able to handle this big spike in demand," but stronger inflation is still likely a "shock to the economy that will pass through," Powell said.