Inflation eased slightly in July, CPI report shows

Inflation eased for the second consecutive month, rising at a 3.4% annual pace in July, in line with economists' expectations and a signal that some price pressures may be easing. 

By the numbers

Economists polled by the financial data firm FactSet predicted July inflation rose at an annual rate of 3.4%.

Oil prices surged in July as tensions escalated in the Strait of Hormuz and Iran-backed Houthi rebels in Yemen targeted shipping in the Red Sea. The escalating conflict pushed Brent crude, the international benchmark, from about $71 a barrel at the start of the month to above $100 by July 23. 

While oil prices have eased since then, American drivers paid an average of $4.06 for a gallon of gasoline last month, data from the U.S. Energy Information Administration showed. That compares with an average of about $3 a gallon in February, before the Iran war began. 

Still, average daily gas prices in July were about 10 cents cheaper than in June, Moody's Analytics chief economist Mark Zandi told CBS News in an email before the July CPI data release, citing Bureau of Labor Statistics data.

Barring fresh escalations in the Iran war, inflation may have already peaked, and could ease throughout the year, dipping close to the Federal Reserve's 2% annual goal by this time next year, Zandi added. 

July's inflation data will be critical to the Federal Reserve's September interest rate decision, following a surprisingly weak jobs report last week. The July labor market report showed employers cut 23,000 jobs last month, rather than a forecast of 95,000 new hires, suggesting the labor market may be much weaker than previously thought. 

Because of that, many economists now expect the Fed to hold rates steady at the September meeting to support the labor market. Before the jobs report, there was a higher probability that the Fed would hike rates next month to tame inflation, according to CME FedWatch, which bases its probabilities on 30-day Fed funds futures prices.