Inflation hit a three-year low but some items are still pricey — here’s what’s rising most

Inflation has now slowed for four straight months, suggesting that price pressures may be finally trending in the right direction after more than two years of the worst inflation crisis seen in a generation.

Inflation in July rose 2.9 percent from a year ago, down from a 3 percent rate in June and returning back to the lowest levels since March 2021, according to the Bureau of Labor Statistics’ monthly consumer price index (CPI) report. That slowdown happened even as inflation increased on a monthly basis by the most since April, thanks to a resurgence in shelter prices.

The slowdown is a positive sign for the Federal Reserve, which has has been signaling to investors and consumers that it might not need to keep interest rates at the highest levels in over two decades for much longer.

Even so, consumers may still feel the pinch of inflation. Since February 2020, consumer prices have increased 20.9 percent, a Bankrate analysis of Bureau of Labor Statistics data shows. That’s well above the historic average for a four-year period. For comparison, inflation rose 18.9 percent in the 2010s, 28.4 percent in the 2000s and 32.4 percent in the 1990s. The post-pandemic price burst means Americans would need about $1,209 to buy the same goods and services that cost $1,000 when the coronavirus-induced recession occurred.

A little bit of inflation is good for consumers. The economy keeps growing and businesses continue expanding, hiring workers and bumping up their pay along the way. Too much inflation, however, feels akin to taking a pay cut. High inflation has consequences beyond just affordability, complicating saving for emergencies or investing for retirement.

Looking for the latest information on consumer prices? Here’s a round-up of where inflation is improving — and where it’s still remaining stubborn.

Highlights of the latest statistics on inflation

What is the current inflation rate?

Inflation rose 2.9 percent in July from a year ago, marking four straight months of slowing inflation, the latest Bureau of Labor Statistics report showed. Excluding the volatile food and energy categories, so-called core prices also dipped to 3.2 percent from 3.3 percent, the lowest since April 2021.

Taken together, the figures reflect a return to the disinflation that had been benefiting consumers and policymakers on the Federal Reserve in the second half of 2023. Inflation is also still well below its peak in June 2022, when it smashed 9.1 percent.

Prices that are rising the most

Of the nearly 400 items that BLS tracks, about 2 in 3 (or 66 percent) increased in price between July 2023 and 2024.

According to BLS, these are the prices that increased most over the past year:

Month-over-month price changes, however, can give consumers a more real-time look at the prices that have recently been popping — or slowing. Lower prices in the same year-ago period, for example, can cause an item to look like it’s gaining speed, when it’s slowing in reality.

Case in point: Back in May, energy prices rose 3.5 percent over the 12-month period, appearing to be gaining speed from the April’s 2.5 percent annual increase despite dipping 2 percent over the month. The reason for the discrepancy? May 2023 was a cheaper month for energy costs.

Consumers, however, should take seasonal variations into account. BLS doesn’t seasonally adjust all of its items, and year-over-year inflation rates can better smooth out those variations.

According to BLS, these are the prices that increased most over the past month:

Why is inflation so high right now?

Consumers might look at the massive 19.2 percent increase in frozen noncarbonated drink prices and wonder why the overall inflation rate is just 2.9 percent. To put it simply, the Bureau of Labor Statistics assigns weights to each individual good or service it tracks, based on how prevalent it’s considered to be in a consumer’s monthly budget.

Currently, the main contributors to inflation are: shelter, transportation services and motor vehicle insurance.

• Shelter accounted for more than two-thirds (or 62 percent) of the annual 2.9 percent increase in July.
• Transportation services accounted for slightly less than one-fifth (or 18 percent) of inflation over the past 12 months.
• Motor vehicle insurance is responsible for 17 percent of the increase in inflation over the past 12 months.

Excluding food, energy and shelter, prices would’ve increased 1.8 percent from a year ago, below the Fed’s preferred 2 percent goalpost.

The drivers of inflation have changed dramatically since the initial post-pandemic price burst. When price pressures peaked in June 2022, shelter was driving just 20 percent of the annual increase in prices. But as consumers emerged from lockdowns with massive pent-up demand at the same time as global supply shortages, energy was driving about a third (32 percent) of inflation, while food prices were driving 15 percent of inflation.

The changing drivers of inflation have evolved as much as the U.S. economy. Supply chains have untangled since the pandemic, helping take the pressure off of goods inflation. However, services such as rent, insurance and even the price of dining out can take months, if not years, to fluctuate — depending on what’s happening with labor costs and consumer spending.

To combat inflation, officials on the Federal Reserve lifted borrowing costs from a rock-bottom level of near-zero percent to a 23-year high of 5.25-5.5 percent.

Post-pandemic inflation: What’s risen the most and what’s gotten cheaper

Of the nearly 400 items BLS tracks, just 21 (or roughly 6 percent) are cheaper today than they were pre-pandemic.

To be sure, prices are expected to rise in the healthiest of economies — though only gradually, at a goalpost of around 2 percent a year.

According to BLS, these are the top 10 items that have jumped the most in price since the pandemic:

Meanwhile, the items that have dropped in price the most since the pandemic are primarily goods and electronics — largely thanks to improving supply chains.

Inflation breakdown by product category

Looking for an easy analysis of how inflation is impacting the key items in your budget? Here’s what Bankrate found.

• Gas

  Over the past 12 months, gasoline prices have declined 2.2 percent, after jumping as much as 59.9 percent in June 2022. Yet, gas prices are still up 28.4 percent since the pandemic. Consumers have likely experienced some volatility at the pump.

  Energy prices tend to be volatile. Between March and April, prices at the pump increased across all 50 states between March and April, AAA data showed. Then, between April and May, they dipped in every state except Colorado. They’re back to rising again more broadly, in all but seven U.S. states.

• Food

  Grocery prices (formally known as food at home) rose 1.1 percent from a year ago and are still 25.2 percent more expensive than they were before the pandemic, BLS data indicates. At their peak, grocery prices soared 13.5 percent in July 2022 from a year ago.

  Of the major shopping categories:

  • Meats: up 3.1 percent over the past year and 27.3 percent since February 2020
  • Fish and seafood: down 1.6 percent from a year ago but still up 15.8 percent since the start of the pandemic-induced recession
  • Dairy: down 0.2 percent over the past year but still 19 percent more expensive since the pandemic
  • Fruits and vegetables: down 0.2 percent over the past year and 17.6 percent more expensive than before the pandemic
  • Sugar and sweets: up 1.8 percent from a year ago and 28.2 percent since the pandemic

  Meanwhile, the price of dining out (formally known as full service meals and snacks) jumped 3.8 percent from a year ago, capping off a 26.1 percent increase since the pandemic.

• Rent

  Rent has become a key corner of inflation — and one of the costliest categories of a consumer’s budge.

  Rent of primary residence in July jumped 5.1 percent from a year ago, BLS data shows. On a monthly basis, rents rose 0.5 percent, the biggest increase since February. The pick up was emblematic of a broader resurgence in shelter prices last month, which rose 0.4 percent between June and July after previously climbing by the slowest pace since early 2021.

  To be sure, rent prices aren’t rising as quickly as they once were, at one point surging 8.8 percent over a 12-month period back in March and April 2023. Yet, Americans who’ve had to sign new leases since the outbreak are feeling the pinch: Rent is up 24.5 percent since the pandemic.

  Real-time measures show that rents aren’t rising as quickly as they were at the height of post-pandemic lockdowns, though a sharper slowdown hasn’t yet been reflected in the official BLS monthly report. One reason could be because of lags, even longer than usual for shelter prices as leases and housing agreements take longer to roll over from the previous year. Another could simply be because homes and mortgage rates have stayed pricey, keeping more renters on the sidelines than usual.

• Vacations

  Inflation hasn’t just made the prices of key household essentials — but the costs of vacations and travel, too. Airline ticket prices, for example, once soared as much as 43 percent from a year ago in September 2022.

  Those prices are finally starting to level off, though a resurgence in fuel and energy costs could jeopardize that slowdown in prices.

  • Airfares: down 2.8 percent from a year ago and 10.9 percent cheaper since February 2020
  • Car and truck rental: down 6.2 percent from a year ago but up 19.4 percent since the pandemic
  • Hotels and motels (lodging away from home): down 2.8 percent from last year but 10.7 percent more expensive than before the pandemic

• Car ownership

  Owning a car has been especially pricey since the pandemic, from the cost of the car itself and the interest rates that finance it to the repair and insurance costs required for upkeep. Making car inflation hard to escape, the majority of households (roughly 92 percent) owned at least one car in 2022, according to the Census Bureau.

  • Motor vehicle insurance: up 18.6 percent from a year ago and 49 percent since the start of the pandemic in 2020
  • Vehicle repair: up 3.4 percent from a year ago and 42.7 percent since February 2020
  • New vehicles: down 1 percent since April 2023 but still 19.1 percent more expensive since February 2020
  • Used vehicles: down 10.3 percent since April 2023 but 24.3 percent more expensive
  • Leased vehicles: down 1.1% percent from a year ago and 33.9 percent since the start of the pandemic

The different methods of measuring inflation: PCE versus CPI

Fed policymakers look at the full picture of economic data when setting interest rates. But officially, they prefer a different measure to see whether they’re succeeding at controlling inflation: the Department of Commerce’s personal consumption expenditures (PCE) index.

But that preference has been keeping Fed watchers on their toes. Lately, the PCE index has been indicating slower inflation, with overall prices now half a percentage point above the Fed’s target — compared to a hotter 0.9 percentage point as shown with CPI.

Those variations have always been afoot. Mainly, they’re because of methodology differences. For starters, PCE takes consumers’ substitutions into account (for example, one family’s decision to buy fish over meat for one month because it’s cheaper).

But another key difference is to blame lately. Both agencies estimate an item’s relative importance differently, with BLS’ gauge giving the most weight to the category of inflation that’s coincidentally been the hottest: shelter.

For Fed officials, the story remains largely the same: Inflation has majorly improved since peaking at a 40-year high back in 2022.

Takeaways for consumers

Slowing inflation gives the Fed room to eventually cut interest rates and consumers a chance to recover some of the purchasing power that they lost. Even so, prices are still higher today than they would’ve been, had the pandemic not occurred, underscoring one of the reasons why Americans might still be feeling some sticker shock.

Meanwhile, how much the Fed cuts interest rates depends on how quickly price pressures retreat back to the Fed’s ultimate 2 percent target — and also how much economic growth holds up. Hiring has weakened, and in July, unemployment hit the highest since the fall of 2021.

• For now, expect historically high interest rates from the Fed: Fed Chair Jerome Powell and Co. have indicated that they might cut interest rates as soon as their next meeting in September. That would simply walk the Fed’s key borrowing benchmark back to levels last seen in 2023 — which were, at the time, the highest since 2006.
• Comparison shop as much as you can: Consumers know to compare offers from multiple lenders before locking in a loan. Why not the same for the items you buy on a regular basis? Compare prices at multiple retailers, see if any stores offer price match and craft a budget. If a product or ingredient pushes your spending goal over the edge, consider swapping it out for something else.
• Use the personal finance tools at your disposal: Finding the right credit card that helps you earn rewards on the purchases you were already going to make can be another way to pad up your wallet. Just be sure you’re not carrying a balance. A 20.79 percent interest rate will never outweigh the cash back.
• Save for emergencies and find the right account: Historically, investing in the markets has been the best way to beat inflation, but today’s high-rate era means savers can find a market-like return without any of the risk. Deposit rates will fall once the Fed starts cutting rates, but your return will still likely beat inflation. Stash your cash in a high-yield account or add a certificate of deposit (CD) to your portfolio, so you can lock in these elevated yields for the long haul.

See how all items BLS regularly tracks have changed over time

• Methodology

  Bankrate analyzed 380 items from the Bureau of Labor Statistics’ consumer price index (CPI) to determine how much specific items have increased in price on both a month-over-month basis, year-over-year basis and then on a pre-pandemic basis (defined as February 2020, when the coronavirus pandemic-induced recession was officially determined to have begun). Bankrate then ranked each item from slowest to fastest appreciation, focusing on the top and bottom 10 in each category, in addition to key aspects of Americans’ budgets. When given the choice, Bankrate chose an item’s seasonally adjusted index.