Was inflation in July alarming?
Posted on August 15, 2025

We’ve had renewed scrutiny on inflation. Inflation reported this week for June would not lead me to conclude that we are seeing higher inflation, but we clearly are not seeing inflation that aims at the Federal Reserve’s 2% annual rate. The inflation rate (core inflation) in July was a bit higher than June, but it was not out of line with monthly rates in the past 12 months.

 

The (historical) 12-month rate for several measures was higher than reported for last month because this July replaced a low July 2024. The six-month rate for core inflation runs at a 2.4% annual rate, a bit less than the 2.6% rate reported last month.

 

I display a table and six graphs that I use to follow the trends in inflation.

 

 

Details:

 

The two most widely-reported measures of inflation are Seasonally-adjusted inflation and Core inflation.

 

Seasonally-adjusted inflation is the most widely reported measure of inflation. July inflation was less than in June. Inflation for the last six months was at 1.9% annual rate. The last six months are lower than the prior six months. The 12-month inflation rate remained at 2.7%.

 

 

Core inflation excludes volatile energy and food components. Inflation for July was greater than June. Inflation for July would translates to 3.9% annual rate. Inflation over the last six months was at 2.4% annual rate. The last six months are lower than the prior six months. The 12-month inflation rate inched up to 3.0% from 2.9%.

 

 

Personal Consumption Expenditures (PCE) excluding Food and Energy is the measure of inflation that the Federal Reserve Board favors. It’s similar to Core inflation, but tends to run a bit lower over time. The graph shows the data ending June; data for July is issued at the end of this month. The last six aim at an annual rate of 3.1%.

 

 

== History of 12-month inflation rates ==

 

Full-year inflation measured by CPI-U was 2.7%, the same as last month [CPI-U inflation is not seasonally adjusted; it’s 12-month rate should match the 12-month rates for Seasonally-adjusted inflation, above.] The 12-month rate is 2.7%, the same as last month.

 

 

I add a graph that shows this July was low and replaced a slightly lower July 2024. August through December will replace very low months of inflation. 12-month inflation for this measure will likely increase in the next six months.

 

 

== Producer’s Price Index ==

 

The change in producer prices (wholesale prices) will impact consumer inflation. PPI announced yesterday was higher in June. The monthly rate would translate to 11% inflation. One component, wholesale prices of fresh fruits and vegetables increased 38% – the highest monthly increase in more than 80 years, and this increase did not show up in grocery store prices in July. August: look out!

 

Over the past year, two months were higher than July and eight months were much, much lower. It’s hard to use one month or even several months to conclude a trend. The rate for the past 12 months was 2.0%; the 12-month rate reported last month was 1.7%.

 

 

== Services ==

 

Inflation for services was greater than in June. The last six months average to 2.9% annual rate; this is less than reported last month which included the high monthly rate in January.

 

 

 

Conclusion: The inflation measures released this week for July don’t show any obvious trend to high inflation: we have not seen much of an increase due to greater tariffs. But we are not trending to 2% annual inflation, the Federal Reserve’s goal. Core inflation aims at about 2.4% annual inflation, similar to last month.