July’s Consumer Price Index (CPI) showed that inflation rose 0.2%, with this monthly reading coming in just below estimates. On an annual basis, however, CPI increased from 3% to 3.2% last month, though this is still near the lowest level in more than two years. Core CPI, which strips out volatile food and energy prices, increased 0.2% while the annual reading declined from 4.8% to 4.7%.

Declining costs for used cars and airfares helped inflation last month, as did moderate readings for shelter, gasoline and food.

What’s the bottom line? While annual inflation did move in the wrong direction, this notch higher is partly due to a slightly negative figure from last July, which was removed from the rolling 12-month calculation and replaced with last month’s 0.2% reading. Inflation has made significant progress lower after peaking at 9.1% in June 2022. Easing inflation is welcome news as it signifies a break from price increases for some goods and services. Plus, lower inflation also typically helps both Mortgage Bonds and mortgage rates improve over time.