Americans may finally be catching a break from relentlessly surging prices — if just a slight one — even as inflation is expected to remain painfully high for months. Thanks largely to falling gas prices, the government’s inflation report for July, to be released Wednesday morning, is expected to show that prices jumped 8.7% from a year earlier — still a sizzling pace but a slowdown from the 9.1% year-over-year figure in June, which was the highest in four decades. The forecast by economists, if it proves correct, would raise hopes that inflation might have peaked and that the run of punishingly higher prices is beginning to ease slightly. There have been other hopeful signs, too, that the pace of inflation may be moderating. At the same time, an array of other economic developments are threatening to keep intensifying inflation pressures. The pace of hiring is robust and average wages are up sharply. And even as gas prices fall, inflation in services such as health care, rents and restaurant meals is accelerating. Price changes in services tend to be sticky and don’t ease as quickly as they do for gas, food or other goods. Those trends suggest that overall inflation may not drop significantly anytime soon. Read: US inflation surges again in June, raising risks for economy President Joe Biden has already pointed to falling gas prices as a sign that his policies — such as releases of oil from the nation’s strategic reserve — are helping combat the higher costs that have hammered household budgets, particularly for lower-income families. Yet Republicans will push ongoing high inflation as a top campaign issue in this fall’s elections, with polls showing that high prices have driven Biden’s approval ratings down sharply. On Friday, the House is poised to give final congressional approval to a revived tax-and-climate package pushed by Biden and Democratic lawmakers. The bill, which among other things aims to ease pharmaceutical prices by letting the government negotiate Medicare’s drug costs, is expected to cut the federal budget deficit by $300 billion over a decade. Yet economists say the measure, which its proponents have titled the Inflation Reduction Act, will have only a minimal effect on inflation over the next several years, though it could could slow price increases a bit more later this decade. Economists have forecast that Wednesday’s inflation report will show that consumer prices rose 0.2% from June to July, according to FactSet. That would mark a steep drop from the 1.3% jump from May to June. But excluding the volatile food and energy categories, so-called core inflation likely stayed high. Economists project that core prices rose 0.5% from in July, still a sharp rise, though down from the 0.7% jump in June. Such an increase would leave core prices 6.1% higher than a year ago, up from a 5.9% year-over year increase in June. If overall inflation did ease in July, it will largely reflect a 16% plunge in prices at the gas pump from their peak in mid-June, when gas hit a national average of $5 a gallon. The average price fell to about $4.20 by the end of July and was just $4.03 by Tuesday. The continuing drop means that lower gas prices will likely pull inflation down further in August. Other items may have also helped lower price gains in July: Food costs, though they likely kept rising, probably did so at a slower pace than in June. Prices for used cars, clothing and rental cars may have fallen, too. Federal Reserve Chair Jerome Powell has said the Fed needs to see a series of declining monthly core inflation readings before it would considering pausing its interest rate increases. Though the Fed more closely tracks a different inflation measure, it also monitors the figures in Wednesday’s report, known as the consumer price index. The Fed has raised its benchmark short-term rate at its past four rate-setting meetings, including a three-quarter point hike in both June and July — the first increases that large since 1994. A blockbuster jobs report for July that the government issued Friday — with 528,000 jobs added, rising wages and an unemployment rate that matched a half-century low of 3.5% — solidified expectations that the Fed will announce yet another three-quarter-point hike when it next meets in September. Financial markets are betting that the Fed will raise rates several more times this year, to a range of 3.5% to 3.75%, but will ultimately have to cut rates by next summer because traders expect the higher rates to cause a recession. Some trends do point to lower future inflation. The supply chain snags that have elevated prices for cars, furniture, appliances and other goods are easing. The number of ships waiting to be unloaded at the Los Angeles/Long Beach port has fallen for six straight months, according to Oxford Economics. Shipping costs have generally leveled off or declined, including for trucking and rail services, Oxford said, though they remain high. And a drop in Americans’ expectations for future inflation may also keep higher prices from becoming entrenched. Such expectations can be self-fulfilling: If people believe inflation will stay high or worsen, they are likely to take steps — such as demanding higher pay — that can then send prices higher in a self-perpetuating cycle. Companies often raise prices to offset higher their higher labor costs. But a survey by the Federal Reserve Bank of New York, released Monday, showed that Americans now expect lower inflation in the next few years than they did a month ago. Yung-Yu Ma, chief investment strategist at BMO Wealth Management, said lower inflation expectations may allow the Fed to react less aggressively to reports, such as last month’s burst of hiring, that suggest the economy is still strong and that inflation could remain high. “It’s a modestly good sign,” Ma said of the inflation expectations data. “It gives them a little bit of room to not take a more aggressive approach.”

U.S. inflation surged to a new four-decade high in June because of rising prices for gas, food and rent, squeezing household budgets and pressuring the Federal Reserve to raise interest rates aggressively -- trends that raise the risk of a recession. The government’s consumer price index soared 9.1% over the past year, the biggest yearly increase since 1981, with nearly half of the increase due to higher energy costs. Lower-income and Black and Hispanic American have been hit especially hard, since a disproportionate share of their income goes toward essentials such as transportation, housing and food. But with the cost of many goods and services rising faster than average incomes, a vast majority of Americans are feeling the pinch in their daily routines. For 72-year-old Marcia Freeman, who is retired and lives off of a pension, there is no escape from rising expenses. “Everything goes up, including cheaper items like store brands,” said Freeman, who visited a food bank near Atlanta this week to try and gain control of her grocery costs. Grocery prices have jumped 12% in the past year, the steepest climb since 1979. Also read: Sri Lanka's central bank raises key rates to curb inflation Accelerating inflation is a vexing problem for the Federal Reserve, too. The Fed is already engaged in the fastest series of interest rate hikes in three decades, which it hopes will cool inflation by tamping down borrowing and spending by consumers and businesses. The U.S. economy shrank in the first three months of the year, and many analysts believe the trend continued in the second quarter. “The Fed’s rate hikes are doing what they are supposed to do, which is kill off demand,” said Megan Greene, global chief economist at the Kroll Institute. “The trick is if they kill off too much and we get a recession.” The likelihood of larger rate hikes this year pushed stock indexes lower in afternoon trading. The central bank is expected to raise its key short-term rate later this month by a hefty three-quarters of a point, as it did last month. As consumers’ confidence in the economy declines, so have President Joe Biden’s approval ratings, posing a major political threat to Democrats in the November congressional elections. Forty percent of adults said in a June AP-NORC poll that they thought tackling inflation should be a top government priority this year, up from just 14% who said so in December. After years of low prices, a swift rebound from the 2020 pandemic recession — combined with supply-chain snags — ignited inflation. Consumers unleashed a wave of pent-up spending, spurred by vast federal aid, ultra-low borrowing costs and savings they had built up while hunkering down. As home-bound Americans spent heavily on furniture, appliances and exercise equipment, factories and shipping companies struggled to keep up and prices for goods soared. Russia’s war against Ukraine further magnified energy and food prices. In recent months, as COVID fears have receded, consumer spending has gradually shifted away from goods and toward services. Yet rather than pulling down inflation by reducing goods prices, the cost of furniture, cars, and other items has kept rising, while restaurant costs, rents and other services are also getting more expensive. The year-over-year leap in consumer prices last month followed an 8.6% annual jump in May. From May to June, prices rose 1.3%, following a 1% increase from April to May. Some economists believe inflation might be reaching a short-term peak. Gas prices, for example, have fallen from the eye-watering $5 a gallon reached in mid-June to an average of $4.63 nationwide Wednesday — still far higher than a year ago. Shipping costs and commodity prices have also begun to fall, and pay increases have slowed. Surveys show that Americans’ expectations for inflation over the long run have eased — a trend that often points to more moderate price increases over time. “While today’s headline inflation reading is unacceptably high, it is also out-of-date,” President Biden said Wednesday. “All major economies are battling this COVID-related challenge.” The latest disappointing data on inflation came out at the outset of Biden’s trip to the Middle East, where he will meet with officials from Saudi Arabia to discuss oil prices, among other subjects. Republican members of Congress have blamed the higher prices on Biden’s economic policies, specifically his $1.9 trillion financial support package approved in March. There have been signs that inflation was slowing before — last summer, and in April of this year — only for it to surge again in subsequent months. “There may be some relief in the July numbers — commodity prices have come off the boil, at least — but we are a very, very long way from inflation normalizing, and there is no tangible sign of downward momentum,” said Eric Winograd, an economist at asset manager AllianceBernstein. For now, the relentless pace of price increases is frustrating many Americans. Delores Bledsoe, a truck driver hauling freight from Carlisle, Pennsylvania to Wisconsin on Wednesday, said her fuel costs have tripled. “It’s making me want to get out of the truck and go drive an Uber,” said Bledsoe, who lives in Houston. “It’s depressing.” Some people are placing blame on companies for using inflation as a cover to raise prices beyond the amount they need to cover their own higher costs. “I feel the inflation pain every day,” Susana Hazard said this week outside a grocery store in New York City. “Every day, everything is going up and up, more than inflation — they’re price-adjusting. Because even if inflation doesn’t happen, they’ve raised the prices.” Most economists say corporate price gouging is, at most, one of many causes of runaway inflation and not the primary one. Housing and rental costs are rising steadily as solid job gains encourage more Americans to move out on their own. Rents have risen 5.8% compared with a year ago, the most since 1986. And the cost of decorating homes is still increasing at a rapid pace — furniture prices are up 13% from a year ago — even as retailers such as Walmart and Target experience rising inventories, which should help lower prices. The biggest shock has been energy prices, which soared 7.5% just from May to June. Gas prices have skyrocketed nearly 60% compared with a year ago. Excluding the volatile food and energy categories, so-called core prices rose 0.7% from May to June, the biggest such spike in a year. Core prices jumped 5.9% from a year ago. Inflation is surging well beyond the United States, with 71 million people pushed into poverty in the three months after Russia invaded Ukraine, the U.N. Development Program said last week. The war’s economic damage has been especially severe in Europe, with its reliance on Russian oil and natural gas squeezing businesses and consumers with sharply higher bills for utilities, groceries, gasoline and more. Inflation reached decades-high levels of 8.6% last month in the 19 countries that use the euro currency and 9.1% in the United Kingdom in May.

Inflation slowed in April after seven months of relentless gains, a tentative sign that price increases may be peaking while still imposing a financial strain on American households. Consumer prices jumped 8.3% last month from a year ago, the government said Wednesday. That was below the 8.5% year-over-year surge in March, which was the highest since 1981. On a monthly basis, prices rose 0.3% from March to April, the smallest increase in eight months. Still, Wednesday’s report contained some cautionary signs that inflation may be becoming more entrenched. Excluding the volatile food and energy categories, so-called core prices jumped twice as much from March to April as they did the previous month. The increases were fueled by spiking prices for airline tickets, hotel rooms and new cars. Apartment rental costs also kept rising. Those price jumps “make clear that there is still a long way to go before inflation returns to more acceptable levels,” said Eric Winograd, U.S. economist at asset manager AB. Even if it moderates, inflation will likely remain high well into 2023, economists say, leaving many Americans burdened by price increases that have outpaced pay raises. Especially hurt are lower-income and Black and Hispanic families, who are disproportionately squeezed by costlier food, gas and rent. For now, a fallback in gas prices in April helped slow overall inflation. Nationally, average prices for a gallon of gas fell to as low as $4.10 in April, according to AAA, after spiking to $4.32 in March. But since then, gas prices have surged to a record $4.40 a gallon. Grocery prices are still spiking, in part because Russia’s invasion of Ukraine has heightened the cost of wheat and other grains. Food prices rose 1% from March to April and nearly 11% from a year ago. That year-over-year increase is the biggest since 1980. Turmoil overseas could accelerate inflation in the coming months. If the European Union, for example, decides to bar imports of Russian oil, world oil prices could rise. So could U.S. gas prices. And China’s COVID lockdowns could worsen supply chain snarls. In April, airfares soared a record 18.6%, the largest monthly increase since record-keeping began in 1963. Hotel prices jumped 1.7% from March to April. Southwest Airlines said last month that it is expecting much higher revenue and profits this year as Americans flood the airports after postponing travel for two years. The company said its average fare soared 32% in the first three months of the year from the same period last year to $159. There are signs that supply chains are improving for some goods. Wednesday’s report showed prices for appliances and clothing both fell 0.8%, while the cost of used cars dropped 0.4%, the third straight decline. Used cars and other goods drove much of the initial inflation spike last year as Americans stepped up spending after vaccines became widespread. Also Read: Biden sees bigger role for US farms due to Ukraine war The escalation of consumer inflation has forced many Americans, particularly people with lower or fixed incomes, to reduce their spending on things like driving and grocery shopping. Among them is Patty Blackmon, who said she’s been driving to fewer of her grandchildren’s sports events since gas spiked to $5.89 in Las Vegas, where she lives. To save money, Blackmon, 68, also hasn’t visited her hairdresser in 18 months. And she’s reconsidering her plan to drive this summer to visit relatives in Arkansas. She was shocked recently, she said, to see a half-gallon of organic milk reach $6. “Holy cow!” she thought. “How do parents give their kids milk?” Blackmon has cut back on meat, and “a steak is almost out of the question,” she said. Instead, she is eating more salads and canned soups.    

Inflation soared over the past year at its highest rate in four decades, hammering America’s consumers, wiping out pay raises and reinforcing the Federal Reserve’s decision to begin raising borrowing rates across the economy. The Labor Department said Thursday that consumer prices jumped 7.5% last month compared with 12 months earlier, the steepest year-over-year increase since February 1982. Shortages of supplies and workers, heavy doses of federal aid, ultra-low interest rates and robust consumer spending combined to send inflation accelerating in the past year. When measured from December to January, inflation was 0.6%, the same as the previous month and more than economists had expected. Prices had risen 0.7% from October to November and 0.9% from September to October. There are few signs that inflation will slow significantly anytime soon. Most of the factors that have forced up prices since last spring remain in place: Wages are rising at the fastest pace in at least 20 years. Ports and warehouses are overwhelmed, with hundreds of workers at the ports of Los Angeles and Long Beach, the nation’s busiest, out sick last month. Many products and parts remain in short supply as a result. The steady surge in prices has left many Americans less able to afford food, gas, rent, child care and other necessities. More broadly, inflation has emerged as the biggest risk factor for the economy and as a serious threat to President Joe Biden and congressional Democrats as midterm elections loom later this year. The Fed and its chair, Jerome Powell, have pivoted sharply away from the ultra-low-interest rate policies that the Fed pursued since the pandemic devastated the economy in March 2020. Powell signaled two weeks ago that the central bank would likely raise its benchmark short-term rate multiple times this year, with the first hike almost surely coming in March. Investors have priced in at least five rate increases for 2022. Read: Under pressure to ease up, Biden weighs new virus response Over time, those higher rates will raise the costs for a wide range of borrowing, from mortgages and credit cards to auto loans and corporate credit. For the Fed, the risk is that in steadily tightening credit for consumers and businesses, it could trigger another recession. Many large corporations, in conference calls with investors, have said they expect supply shortages to persist until at least the second half of this year. Companies from Chipotle to Levi’s have also warned that they will likely raise prices again this year, after having already done so in 2021. Chipotle said it’s increased menu prices 10% to offset the rising costs of beef and transportation as well as higher employee wages. And the restaurant chain said it will consider further price increases if inflation keeps rising. “We keep thinking that beef is going to level up and then go down, and it just hasn’t happened yet,” said John Hartung, the company’s chief financial officer. Executives at Chipotle, as well as at Starbucks and some other consumer-facing companies, have said their customers so far don’t seem fazed by the higher prices. Levi Strauss & Co. raised prices last year by roughly 7% above 2019 levels because of rising costs, including labor, and plans to do so again this year. Even so, the San Francisco-based company has upgraded its sales forecasts for 2022. “Right now, every signal we’re seeing is positive,” CEO Chip Bergh told analysts. Many small businesses, which typically have lower profit margins than larger companies and have struggled to match their sizable pay raises, are also raising prices. The National Federation for Independent Business, a trade group, said it found in a monthly survey that 61% of small companies raised their prices in January, the largest proportion since 1974 and up from just 15% before the pandemic. “More small business owners started the new year raising prices in an attempt to pass on higher inventory, supplies and labor costs,” said Bill Dunkelberg, the NFIB’s chief economist. “In addition to inflation issues, owners are also raising compensation at record-high rates to attract qualified employees to their open positions.” Those pay gains could eventually force additional price hikes as companies seek to cover the costs of the higher wages. In the past year, sharp increases in the costs of gas, food, autos and furniture have upended many Americans’ budgets. In December, economists at the University of Pennsylvania’s Wharton School estimated that the average household had to spend $3,500 more than in 2020 to buy an identical basket of goods and services.