Although U.S. consumer prices ticked up last month, the annual inflation rate eased a bit again in July, the Labor Department said Aug. 12.

From June to July, consumer prices rose 0.1%, in line with forecasters’ expectations. Over the year, they were up 3.4%, meaning prices still rose but at a slower pace than before. After surging since the start of the Iran war which drove gas prices up, the annual inflation rate fell from 4.2% in May to 3.5% in June.

A deceleration in year-over-year price increases could be good news for consumers struggling with the cost of living, although their paychecks still may not be keeping up. Average hourly earnings for employees on private nonfarm payrolls rose just 3.2% over the year in July.

While slowing annual inflation is likely welcome news to Federal Reserve officials who have promised to deliver price stability, it remains well above the Fed’s 2% target, as it has for the past five years. Policymakers’ next interest rate decision in September remains difficult to predict as officials wait for August data.

What is the core US inflation rate?

“Core” inflation is the department’s way to measure price increases while excluding volatile food and energy costs. It’s closely watched for evidence of whether underlying price pressures are easing amid supply shocks that can drive the headline Consumer Price Index number higher. 

It rose 0.2% over the month, after staying put in June. Over the year, core inflation was up 2.5% in July, slightly lower than the 2.6% rate recorded in June. 

Is gas getting cheaper?

While gas prices rose in the second half of July as the war continued disrupting oil traffic in the Strait of Hormuz, they were lower last month on average than in June. Over the month, the department’s index for gasoline fell 2.9%. Gas prices are still up 24.6% over the year.

“Whether or not prices fall again in August will depend on how negotiations progress between the US and Iran over the coming weeks,” Bank of America Global Research U.S. economist Stephen Juneau said in a report ahead of the Consumer Price Index’s release.

As of Aug. 12, the national average price of a gallon of regular unleaded gas is $4.04, according to AAA, up from $3.88 last month but down from $4.08 last week.

(This is a developing story that will be updated to add new information.)

Reach Rachel Barber at rbarber@usatoday.com, follow her on X @rachelbarber_, and subscribe to her newsletter “Making More of Your Money” here.