A key inflation measure accelerated in July, highlighting how tariffs and broader economic pressures are affecting household budgets. The Consumer Price Index (CPI) rose 2.7% year over year, while “core” inflation, which strips out food and energy, climbed 3.1% — its fastest pace in five months. For families, that translates into higher costs across nearly every pillar of everyday spending.

Housing

Housing remains the single largest driver of consumer inflation. The shelter index increased 5.2% year over year, continuing to weigh heavily on household budgets. Rising rents and stubbornly high mortgage rates have left families with little relief, keeping housing inflation a core measure of financial strain. Because shelter costs are both unavoidable and recurring, they carry disproportionate weight in how people experience inflation day-to-day.

Food

Food prices were up 2.1% compared with July 2024. Grocery costs have stabilized somewhat, but dining out remains more expensive, as restaurants pass higher labor and ingredient costs on to customers. Even small increases hit families hard, since food spending is a constant and highly visible expense.

Energy

Energy provided rare relief, falling 1.5% over the past year, led by a 2.2% drop in gasoline. However, energy prices are volatile and closely tied to global markets. Economists caution that this reprieve may be temporary, especially as tariffs ripple through supply chains for fuel and equipment.

Health care

Medical care prices rose 2.9% year over year. Hospital services and health insurance remain persistent cost burdens, with health care inflation outpacing wage growth for many households. Because health costs are often unexpected, they carry outsized weight in household financial anxiety.

What’s driving prices higher?

Economists point to tariffs as a primary culprit. Businesses that had stockpiled goods earlier in the year are now running out of buffer, leaving them little choice but to raise prices. The cost increases are particularly visible in services, apparel, and household goods. At the same time, wages have stagnated after adjusting for inflation, leaving consumers more sensitive to price hikes. Analysts warn that if tariffs remain in place, businesses will continue to pass along costs, keeping inflation sticky despite slowing demand.