Washington Inflation Holds Steady as Grocery and Gas Prices Fall

Inflation in July stayed at the same pace as June, thanks to falling prices for essentials such as groceries and gasoline, which helped offset increases in other consumer costs.

Underlying Inflation Pressures Rising

Economists warn that policy decisions from the Trump administration are already contributing to price pressures in some goods and services. They expect these effects to intensify toward the end of the year.

Mark Zandi, chief economist at Moody’s, noted that the influence of tariffs and immigration policy is already visible.
While not yet overwhelming, he said these effects will soon become much stronger.

Consumer Price Index Holds Steady

The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose 2.7% in July compared with a year earlier, matching June’s rate and falling short of expectations.

The CPI is a key inflation gauge, tracking price changes for a broad range of goods and services, from food and fuel to entertainment.

Food and Fuel Costs Decline

Grocery prices fell 0.1% from June to July, while gasoline prices dropped 2.2%, according to CPI data.

Economists often focus on “core CPI,” which excludes food and energy to avoid short-term volatility.

Core Inflation Hits New High for 2025

Core CPI rose 3.1% year-over-year in July, up from 2.9% in June and marking its fastest growth since February.
Oxford Economics projects core inflation could peak at 3.8% by year-end as tariff impacts become more pronounced.

Tariffs Driving Goods Inflation

Tariffs — taxes on imports paid by U.S. companies — often result in higher prices for consumers.
Yale University’s Budget Lab estimates that existing tariffs could cost the average household $2,400 in the short term.

The clearest impact is seen in goods prices, such as household furnishings and apparel, which have risen steadily over the past two months — a trend economists say is unusual in normal times.

Rising Prices in Household Items

In July, household furnishings prices rose 0.7% from June, apparel increased by 0.1%, and toy prices edged up 0.2%.
Annual inflation for core commodities climbed 1.2%, the highest rate in over two years.

Not Just a One-Month Spike

Economists expect these inflationary trends to persist, though some tariff-affected items, such as vehicles and major appliances, have yet to see significant price hikes.

White House Dismisses Tariff Impact Claims

Stephen Miran, chair of the White House Council of Economic Advisers, told CNBC that there is “no evidence whatsoever” linking tariffs to higher consumer prices.