July 2026 CPI rose 0.1% on a seasonally adjusted basis and 3.4% over the past twelve months, while core CPI, which excludes food and energy, increased 0.2% in the month and 2.5% over the year, according to the Bureau of Labor Statistics release of August 12, 2026 [1]. The annual headline rate edged down from 3.5% in June and the core rate from 2.6%, so both measures continued to cool [1]. Energy fell 1.5% in July but was still 14.7% higher than a year earlier, which is the whole gap between headline and core [1]. For the Federal Reserve, the report confirms that underlying inflation is close to its goal even as the energy shock keeps the headline elevated.
July 2026 CPI by category
The energy index fell 1.5% in July after a 5.7% drop in June, and gasoline fell 2.9% after a 9.7% decline [1]. Over twelve months, energy was up 14.7% and gasoline 24.6% [1]. Food rose 0.1% in the month and 3.0% over the year [1]. Shelter rose 0.1% for a second month and was up 3.2% year over year, down from 3.3% in June [1]. Airline fares jumped 2.2% in the month, motor vehicle insurance fell 0.3%, and prescription drugs fell 0.8% [1].
| Index (July 2026) | Monthly change | 12-month change |
|---|---|---|
| All items | +0.1% | +3.4% |
| Core (less food and energy) | +0.2% | +2.5% |
| Food | +0.1% | +3.0% |
| Energy | -1.5% | +14.7% |
| Gasoline | -2.9% | +24.6% |
| Shelter | +0.1% | +3.2% |
Why core at 2.5% is the number that matters
Core CPI at 2.5% is the lowest annual reading of this cycle, down from 2.6% in June [1]. Two consecutive months of 0.1% shelter gains are the main reason: shelter is about a third of the index and had been running near 0.3% a month [1]. If shelter holds near 0.1% to 0.2%, core CPI would fall toward 2% in the first half of 2027. The 0.2% monthly core gain in July, up from 0.0% in June, shows that the June reading was unusually soft rather than a new trend, but 0.2% a month is still a 2.4% annual pace [1].
The CPI index level and the two-year picture
DataPorium's CPI series shows the all-items index at 332.813 in July 2026, compared with 322.132 in July 2025 and 313.566 in July 2024 [5]. The increase over two years is about 6.1%, and the past twelve months account for more than half of it. Readers can chart the index against the unemployment rate and the funds rate on DataPorium's economic metrics page. The level matters for households because prices do not return to where they were; a slowdown in inflation only means the index rises more slowly from a higher base.
What the July CPI means for the Fed and interest rates
The FOMC held its target range at 3.50% to 3.75% on July 29 by a 9 to 3 vote, with three members preferring a quarter-point increase, and the statement described inflation as elevated with supply shocks affecting energy and other sectors [3]. The July CPI weakens the case for a hike at the September meeting: core inflation is 2.5% and falling, and energy, the source of the shock the statement cited, is now declining month over month [1][3].
The labor market also cooled. The July jobs report, released August 7, showed nonfarm payrolls falling by 23,000, the unemployment rate at 4.1%, and average hourly earnings up 3.2% over the year [2]. Wage growth of 3.2% with core inflation of 2.5% leaves real wages rising modestly and does not signal a wage-price spiral [1][2]. Together, the CPI and jobs reports argue for the Fed to stay on hold, with the hawks losing their strongest argument and the doves lacking a reason to cut while headline inflation remains above 3%.
How bonds reacted
Treasury yields fell after the report. The 2-year yield was 4.22% on August 11, 4.20% on August 12, the day of the release, and 4.15% on August 13, according to the U.S. Treasury's daily par yield curve [4]. The 10-year yield moved from 4.54% to 4.52% and then 4.47%, and the 30-year from 5.25% to 5.20% [4]. The 2-year yield at 4.15% still sits above the top of the target range, so the market has not fully removed the possibility of a hike, but the move is in the direction of no change [4].
Investment implications
- Bonds: With core inflation at 2.5% and the 2-year at 4.15%, short Treasuries offer a real yield above 1.5% on a core basis [1][4]. Investors may consider that the front end is the most attractive part of the curve if the Fed holds.
- Stocks: Falling energy and slowing shelter costs support consumer discretionary spending. Airlines, whose fares rose 2.2% in the month, show pricing power in travel, while insurers face a 0.3% drop in motor vehicle premiums [1].
- Policy view: The data support letting supply-side relief and steady policy bring inflation down, rather than fiscal stimulus or a rate hike. The counterpoint is that a 14.7% annual energy gain shows how much of the 2026 inflation was imported, and that the domestic cure is more energy production and simpler permitting, not monetary policy [1].
July's 2.5% core CPI reading tells the Fed that underlying inflation is nearly back at target, and only the energy shock keeps the headline rate at 3.4%.
Key takeaways
- CPI rose 0.1% in July 2026 and 3.4% over the year, down from 3.5% in June [1].
- Core CPI rose 0.2% in the month and 2.5% over the year, the lowest of this cycle [1].
- Energy fell 1.5% and gasoline 2.9% in July, but both remain far above year-ago levels [1].
- Payrolls fell 23,000 in July and wage growth slowed to 3.2%, removing any wage pressure argument [2].
- The 2-year Treasury yield fell to 4.15% and the 10-year to 4.47% by August 13, 2026 [4].
Frequently asked questions
What was the inflation rate in July 2026?
The consumer price index rose 3.4% over the twelve months to July 2026 and 0.1% in the month, according to the BLS [1].
What was core CPI in July 2026?
Core CPI rose 0.2% in July and 2.5% over the year, down from 2.6% in June and the lowest reading of this cycle [1].
Will the Fed raise rates in September 2026 after the July CPI?
The July CPI weakens the case for a hike. Core inflation is 2.5% and energy prices are falling, though headline inflation of 3.4% and the three hawkish dissents in July mean a hike is not off the table [1][3].
Why is headline CPI higher than core CPI in 2026?
Energy prices are up 14.7% and gasoline 24.6% over the year, while food is up 3.0%. Excluding food and energy, prices rose only 2.5% [1].
