This story about the July 2026 CPI inflation report will be updated with further details.

Inflation cooled slightly in July even as the pace of consumer price growth from a year ago remains elevated, as the Federal Reserve considers a potential interest rate hike next month.

The Bureau of Labor Statistics (BLS) said on Wednesday that the consumer price index (CPI) – a broad measure of how much everyday goods like gasoline, groceries and rent cost – increased 0.1% on a monthly basis and is up 3.4% from a year ago.

Customers shop at Kroger on Jan. 22, 2026, in Little Rock, Arkansas. (Will Newton/Getty Images)

Expectations vs. reality

Those figures were in line with the estimates of economists polled by LSEG. The monthly data follows a reading of negative 0.4% in June, while the annual figure is slightly cooler than last month’s 3.5% reading.

So-called core prices, which exclude volatile measurements of gasoline and groceries to better assess price growth trends, were up 0.2% from a month ago and are 2.5% higher year over year. The monthly figure represents a slight uptick after price growth was flat in June, while the annual figure is slightly cooler than last month’s 2.6% reading.

CONSUMER INFLATION COOLED MORE THAN EXPECTED IN JUNE AS GAS PRICES FELL

The cost of living breakdown

High inflation has created severe financial pressures in recent years for most U.S. households, which are forced to pay more for everyday necessities like food and rent. Price hikes are particularly difficult for lower-income Americans, because they tend to spend more of their already-stretched paychecks on necessities and have less flexibility to save.

Energy prices fell 1.5% on a monthly basis in July, but remain up 14.7% from a year ago. That follows a decline of 5.7% in June, when energy prices were easing quickly.

FED’S HAMMACK SAYS MULTIPLE RATE HIKES MAY BE NEEDED TO TAME INFLATION

Gasoline prices declined 2.9% on a monthly basis in July but are 24.6% higher than a year ago. Electricity costs rose 0.1% on a monthly basis and are up 4.2% over the last year.

Food prices increased 0.1% from a month ago and are up 3% compared with last year. The food at home index declined 0.1% in July and is up 2.7% from a year ago, while the food away from home index rose 0.3% in July and is 3.4% higher than last year.

A shopper at the Reading Terminal Market in Philadelphia, Pennsylvania, US, on Monday, Feb. 12, 2024. The Bureau of Labor Statistics is scheduled to release US consumer price index (CPI) urban consumers figures on February 13.  (Hannah Beier/Bloomberg via Getty Images)

The meats, poultry and fish index declined 0.7% on a monthly basis and is up 4.5% from a year ago. Much of that increase has been driven by beef and veal prices, which are up 9.4% in the last year after a 0.8% decline in July. Egg prices fell 0.5% on a monthly basis and are down 25.7% from a year ago as flocks continue to stabilize after an avian flu outbreak.

The fruits and vegetables index fell 0.1% for the month and is up 5.1% from a year ago. Lettuce prices fell 16.4% in July amid a Cyclospora outbreak, but remain up 7.5% from a year ago.

Housing prices rose 0.1% in July, which the BLS noted was responsible for about two-thirds of the total monthly increase, while the shelter index is up 3.2% from a year ago. Tenants’ and household insurance prices decreased 0.1% in July but are up 4.8% from a year ago.

Transportation services prices rose 0.3% in July and are up 2.9% from a year ago. Airline fares rose 2.2% in July and are up 25.5% over the last year.

What experts are saying

Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management, said that, “In-line inflation will keep the ‘no need to hike rates’ narrative that took hold after last week’s jobs report intact.”

“There will be another round of inflation data before the September FOMC meeting, so the storyline could still change. But unless those numbers tell a much different story, the Fed will likely still be in a position to leave rates unchanged next month,” Zentner added.

FED POLICYMAKERS LEAVE RATES UNCHANGED AMID ELEVATED UNCERTAINTY

Kevin Warsh, chairman of the US Federal Reserve, during a news conference following a Federal Open Market Committee (FOMC) meeting in Washington, DC, US, on Wednesday, June 17, 2026. Federal Reserve officials left interest rates unchanged and were sp (Al Drago/Bloomberg via Getty Images)

Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management, said that, “With another round of inflation data due before the September FOMC meeting, it remains all to play for, but today’s in-line report was a good start.”

“Contained core inflation adds to the encouraging signs in last month’s release of a moderation in underlying inflation, helping strengthen the case for a September hold,” Rosner added.

What does it mean for the Fed and interest rates?

The July CPI inflation report shifted the outlook for the Federal Reserve’s next monetary policy meeting, with traders now leaning more clearly toward a continued pause in interest rate moves.

According to the CME FedWatch tool, the market now sees a 61.9% probability of rates remaining at the current target range of 3.5% to 3.75%, up from 51.6% a day ago. Meanwhile, the odds of a 25 basis point hike declined to 38.1% from 48.4% yesterday.

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Looking ahead through the end of the year, the tool continues to see a single 25-basis-point rate hike as the likeliest outcome with 45% odds, compared with a 28.9% chance rates remain at their current level and a 22.5% chance of two 25-basis-point hikes.

What does it mean for the market?

Up to 90,000 banking, legal and accountancy jobs based in London are forecast to move to other parts of the country over the next five years, bringing an estimated £9 billion boost to regional economies including Manchester, Birmingham and Leeds, according to analysis by Robert Walters, the listed recruitment company.

The recruiter estimates that figure could rise to £15 billion once the spending of relocated workers in their new home towns, and the extra work generated for local supply chains, is taken into account.

Robert Walters said more companies were looking to move some of their teams out of London because of the cost of running a business in the capital, where a shortage of prime office space has pushed rents to record highs.

The 90,000 roles represent 2.5 per cent of London’s overall workforce. Robert Walters predicts that up to 12,000 jobs will have moved out of the capital by the end of 2027, rising to 45,000 by 2029. Senior leadership teams are expected to remain in London, with companies instead bolstering junior ranks with local talent.

“Our forecast indicates a rebalancing of the scales towards stronger regional jobs growth over a widespread shift of business activity away from London,” said Jonny Bohane, of Robert Walters’ market intelligence team.

The analysis used past job relocations by major UK employers to establish a baseline, then combined Robert Walters’ own placement volumes with LinkedIn movement data to project regional hiring demand. The model also factored in office capacity, hybrid working levels, the depth of local talent pools, regional development initiatives and government decentralisation programmes.

The northwest of England, including Manchester and Liverpool, is forecast to be the biggest beneficiary, with 22,500 jobs expected to move there by 2031. Bohane’s team estimates this could inject up to £2.25 billion into the region’s economy, “reinforcing its status as the UK’s second hub for growth and innovation”.

About a fifth of the relocated positions, up to 18,000, could end up in the Midlands, principally Birmingham, bringing a £1.8 billion economic boost, the report said. Yorkshire stands to attract about 13,500 roles, adding £1.35 billion to the local economy. Most of the remaining 36,000 or so jobs are expected to move to other major regional cities including Bristol, Edinburgh, Glasgow, Cambridge, Newcastle, Liverpool, Reading and Cardiff.

Daniel Harris, UK managing director at Robert Walters, said he expects the trend to accelerate as “cost considerations remain high, and hybrid working allows organisations to build more geographically diverse teams”.

“Manchester, Leeds and Birmingham are the engine rooms of activity,” Harris said. “Over the last decade, these regional centres have become key career destinations for UK white-collar workers. They offer a significant presence of high-profile, multinational employers, vibrant cultural scenes and leisure opportunities, as well as a lower cost of living compared to the capital.”

Several large employers have already made similar moves. Birmingham is home to Deloitte’s second-largest UK office, Siemens moved its UK headquarters from Surrey to Manchester in 2019, and the Bank of England has committed to basing one in ten of its staff in Leeds by 2027, although only 156 employees had registered interest in transferring to its Leeds hub by late last year.

The forecasts align with the devolution agenda of Andy Burnham, the prime minister, who has promised to deliver “good growth in every postcode” and wants to reduce the country’s reliance on London, which accounts for about a quarter of the UK’s economic output. Last month he opened a northern branch of Downing Street, No 10 North, as part of his plans for wider political devolution and regional economic growth.

“The appeal of these regional cities shouldn’t be underestimated. But growth isn’t determined by businesses relocating or creating new jobs alone,” Bohane said. “When professionals move into an area, the benefits ripple through the local economy. Increased demand supports everything from transport and housing to cafés, co-working spaces and the wider network of local businesses that keep these cities running.”

Jamie Young

Jamie Young is Senior Reporter at Business Matters, covering SME finance, employment law and Westminster policy since 2016. He has reported on every Budget and Autumn Statement since 2018, helped make sense of the ‘covid era’ and the bounce-back loan scheme from launch through the fraud investigations, and broke the magazine’s coverage of the 2024 late-payment reforms. He joined Business Matters straight from completing his BA in Administration from Exeter University and is NCTJ-qualified. Reach him at jyoung@cbmeg.co.uk

US prices rose 3.4% in the year to July, slightly lower than the 3.5% in the year to June, new figures show.

Energy remained volatile as the Middle East conflict has continued, with gasoline up 24.6% over the year. The sharp rise reflects ongoing strains in global energy markets, even as overall energy costs dipped in July.

Month to month, inflation rose 0.1%, mainly due to an increase in housing costs, the Bureau of Labor Statistics said. Even small moves in rent can lift the overall headline figure as it makes up a large share of household spending.

Food prices rose only slightly in July and at a slower rate than in June, while energy prices fell, offering some relief for consumers.

Prices excluding food and energy rose 0.2% after staying flat in June, with medical care and airline tickets edging higher and car insurance continuing to fall.

The new Federal Reserve chair, Kevin Warsh, has said the central bank’s priority is to “keep inflation moving down” while avoiding unnecessary shocks to the economy.

President Donald Trump has also said inflation is still too high for many families, pointing to rent and grocery bills as signs that the cost of living remains a major concern.

Financial markets reacted calmly to the latest figures, with stocks little changed as the figures were broadly in line with market expectations.

Recent labour market concerns have also softened expectations for a rate increase, after July’s report showed a loss of jobs.

The Pattyman has secured loaning funding from the Development Bank of Wales to expand

A Cardiff-based artisan food firm is set to scale up production of its Jamaican-inspired produce to meet growing customer and trade demand.

Founded by Leroy Williams in 2021, the Pattyman began as a home-based venture inspired by his late parents -a father from the Windrush generation and a mother from the Valleys. Drawing on traditional family recipes,

Mr Williams set out to create a food business that celebrates both sides of his heritage through authentic Jamaican-inspired products influenced by Welsh culture and identity.

Operating from Tremorfa Industrial Estate, the business produces a range of artisan products including award-winning Red Pepper Jelly, sauces, relishes, jerk marinades, rum punch and Jamaican patties. The business supplies customers directly while also serving wholesale and trade markets across Wales and beyond.

At the heart of the brand is the Welsh concept of cynefin, meaning a sense of belonging and connection to place.

To support its growth it has secured a £50,000 microloan from the Development Bank of Wales. Mr Williams, said:“The Pattyman started as a way of honouring my parents and celebrating the cultures that shaped me. My dad came to Wales as part of the Windrush generation and my mum was from the Welsh Valleys, so I wanted to create something that brought those parts of my identity together.

“Food has always been about family, community and connection. Every recipe has a story behind it and every product reflects the traditions that were passed down to me.

“This investment gives us the platform to build on what we’ve achieved so far. It will help us increase capacity, support future growth and continue sharing the flavours and heritage that make the Pattyman unique with more customers.”

Dylan Evans, assistant investment executive at the Development Bank of Wales, said:”The Pattyman is a great example of a Welsh business with a distinctive proposition, strong values and clear growth ambitions. Leroy has built a brand that stands out through the quality of its products and the story behind them.

“Businesses like the Pattyman demonstrate how smaller investments can make a meaningful difference when it comes to increasing capacity, developing operations and supporting sustainable growth. We look forward to supporting Leroy as he takes the business forward.”

Financed by Welsh Government, the development bank’s £500m Wales Flexible Investment Fund supports Welsh businesses with terms of up to 15 years. Loans, mezzanine finance, and equity investments are available from £25,000 to £10m.

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