U.S. inflation cooled for a second consecutive month in July as price pressures from energy markets continued to stabilize. According to data released by the Labor Department, consumer prices rose 3.4% year-over-year, down slightly from 3.5% in June.

On a monthly basis, the Consumer Price Index (CPI) rose 0.1%, rebounding from a slight drop in June. A modest decline in pump prices helped keep the monthly gain subdued, even as shelter costs and food prices posted small gains. Core inflation, which excludes volatile food and energy components, held at an annual rate of 2.5%.

Despite the second straight month of cooling, overall inflation remains higher than early-year levels. Persistent pressures—including elevated fuel costs, housing expenses, and lingering supply chain tariffs—continue to weigh on household budgets.

For Federal Reserve officials balancing a cooling labor market against elevated living costs, the latest data reinforces expectations that policymakers will keep close watch on price stability before adjusting interest rates.