The CPI is Up 0.1% in July

The CPI was up 0.1% in July. When you look at the 3 month average versus the YOY numbers it appears that energy moderated considerably in the last few months. However, food is still up 4.3% from a year ago. Details of the article can be found at Market Watch and the original government press release can be found at BLS.

With gasoline prices falling, U.S. consumer prices increased 0.1% in July, the slowest inflation rate in eight months, the Labor Department reported Wednesday.

The core consumer price index, which excludes volatile food and energy prices, increased 0.2% for the second straight month.

Falling energy prices, a moderate rise in housing costs and flat auto prices held the CPI in check for July, partially offsetting higher prices for apparel and medical care.

The CPI is up 2.4% in the past year, the lowest year-over-year increase since February, while the core CPI is up 2.2%, close to the upper end of Federal Reserve's target zone.

Fed officials have noted that inflation has slowed since last year, but they've also said they are not persuaded that "a sustained moderation" has been "convincingly demonstrated."

The three-month annualized change in core inflation has picked up for three months in a row and is now up at a 2.5% annual pace. "The pattern gives backbone to the Fed's continued insistence that a 'sustained moderation' in the inflationary environment may not yet have taken hold," wrote Kenneth Beauchemin, an economist for Global Insight.

Officially, the Fed has said it's more worried about higher inflation than slower growth, but financial markets have a different view, betting that the Fed will lower its overnight interest-rate target as early as next month to ensure that the weakness in the housing and credit markets doesn't create too much of a drag on the broader economy.