Read the full article on KETV 7
New report shows where inflation is headed as Iran War persists
Inflation has remained stubbornly high for years, but elevated fuel prices from the war have contributed to the challenge.
WASHINGTON —
A new report released on Wednesday morning offers the latest sign of where prices are headed. Inflation has remained stubbornly high for more than five years now, but the conflict with Iran and the resulting increase in fuel costs have contributed to the long-standing challenge.
According to the Labor Department, overall consumer prices increased by 3.4% in July from a year ago, down slightly from 3.5% in June. That’s still well above the 2.4% rate before the Iran War began in February.
Advertisement
Month-to-month, inflation increased by 0.1% in July after previously falling by 0.4% in June. While several factors shape consumer prices, the shift happened alongside a turning point in the conflict with Iran. In June, tensions were cooling, and fuel prices started to ease in response. The ceasefire later collapsed in July, and gas prices started rising again later in the month.
President Donald Trump argued that prices were generally moving in the right direction when he spoke to reporters on Tuesday night, ahead of the latest CPI report.
“Prices are dropping fast. Iran is going fine. It’s absolutely fine. We totally control the Strait of Hormuz,” Trump said.
But Iran is still insisting that the Strait, a key waterway for oil shipments, won’t be reopened until the US meets a range of demands.
Meanwhile, the Trump administration is using economic pressure to prompt Tehran to make concessions, from sanctions to a blockade of Iranian ports. U.S. Central Command said Tuesday that American forces fired on a Panamanian-flagged ship in the Gulf of Oman that attempted to violate the U.S. blockade.
The conflict also has economic consequences for Americans as diplomacy sputters.
Oil prices have fluctuated day to day amid uncertainty about the direction of the conflict. National average gas prices were roughly $4.04 per gallon on Wednesday, down from $4.08 a week ago but up from $3.88 last month, according to AAA.
Experts say that persistently high inflation could increase the likelihood of an interest rate hike from the Federal Reserve later this year. The board was divided on next steps at its last meeting, but ultimately decided to hold its key borrowing rate unchanged at 3.5%-3.75%.
According to the CME’s FedWatch gauge, traders see the Fed’s September meeting as presenting a 50-50 chance for an interest rate increase, with higher odds in October or December. Wednesday’s modest inflation report could ease pressure on the central bank to approve a rate hike quickly, as the president continues to push for cuts.
The timing of a potential rate hike could be politically significant ahead of midterm elections this fall, largely focused on affordability.
It comes as recent polls give the president low marks on the economy. Just 32% of U.S. adults approved of Trump’s handling of the issue in an AP-NORC poll conducted in late July.
Another poll from Reuters/Ipsos found that, for the first time in nearly a decade, more Americans said that Democrats were better stewards of the economy than Republicans.
The lead for Democrats on the question is slight and within the margin of error. Still, it’s a significant change from the 20-point edge that Republicans had on the economy in Jan. 2024.
Last week, Trump cast doubt on similar poll results and defended his economic record.
“The economy’s the greatest economy we’ve ever had by far,” Trump said.
