US consumer prices rose modestly in July, with inflation broadly in line with expectations and keeping the Federal Reserve’s options open ahead of its September policy meeting.

The Consumer Price Index rose 0.1% in July after falling 0.4% in June, according to data released by the Labor Department’s Bureau of Labor Statistics.

On an annual basis, consumer prices increased 3.4% in July, easing slightly from the 3.5% rise recorded in June. Excluding food and energy, core CPI rose 0.2% during the month after remaining unchanged in June.

Core inflation increased 2.5% over the 12 months through July, compared with 2.6% in June.

The figures broadly matched economists’ expectations. A Reuters poll had forecast a 0.1% monthly increase in headline inflation and a 0.2% rise in core prices.

The Federal Reserve primarily uses the Personal Consumption Expenditures price indexes when assessing progress towards its 2% inflation target.

The latest inflation data comes after weaker than expected employment figures raised concerns about the strength of the US economy. Financial markets have been closely watching economic data for clues about the Federal Reserve’s next move on interest rates.

The central bank will receive another inflation report and a fresh employment report before its September 15-16 policy meeting, giving policymakers additional information to assess the economy and the outlook for interest rates.

Economists expect inflation pressures to strengthen in August, partly due to higher oil prices, while employment growth could improve as temporary seasonal effects fade.

The Federal Reserve left its benchmark overnight interest rate unchanged at 3.50% to 3.75% at its previous meeting.

Oil prices remain another concern for policymakers and consumers. The United States’ position as a net oil exporter, along with reductions in petroleum inventories, has helped cushion some of the economic impact of higher energy costs linked to the conflict in the Middle East.

However, some economists have warned that the cushion may not last indefinitely, as the US and other countries could eventually need to rebuild depleted petroleum inventories, potentially keeping oil prices elevated.

President Donald Trump has continued to weigh his options over the conflict with Iran, including whether to intensify economic pressure or consider stronger military action.

While the latest inflation figures may reduce pressure on the Federal Reserve to raise interest rates further, they could offer limited relief to American households still facing elevated living costs.

Higher prices continue to put pressure on household budgets, while persistent inflation has contributed to growing concerns among consumers.

The cost of living issue could also become politically significant ahead of the November midterm elections, when voters will decide control of the US Congress. Trump made reducing inflation and improving household finances a central promise of his 2024 presidential campaign. (Arise News)

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