ANALYSIS | The good, the bad and the unknown in the latest inflation news

This is how the Inflation Reduction Act could affect you 2:05

(CNN) --

Good news: US prices were broadly unchanged in July, the first month since November 2020 in which prices did not increase.

We deserve a break!

Bad news: Inflation remains too high, with consumer prices up 8.5% from last July, and well above the 2% that government policymakers consider healthy.

Americans still feel the impact of price stickers in their daily lives.

• Inflation gives the US a break in July: consumer prices slow with an increase of 8.5% year-on-year

While fuel costs, particularly gasoline prices, have fallen in recent months, the core annual inflation rate that strips out more volatile items like energy and food rose 5.9%. year-on-year, matching the increase in June.

"When you look at where we've been and put this into perspective, you can see that when you compare it to January 2020, it looks like we're winding down," CNN's Rahel Solomon said during an appearance on "Newsroom."

Solomon said a single report like Wednesday's might not affect the Federal Reserve's aggressive anti-inflationary plan to raise interest rates.

It is a pattern of these kinds of reports, spread out over months, that policymakers are looking for.

Gas prices down, but...

Inflation in the US, the highest in 40 years 2:15

Gasoline prices fell 7.7% from June to July, but are still up 44% compared to a year ago.

In the real world, that means gas prices have dropped from a record average of more than $5 a gallon in early June to a national average of just a penny over $4 on Wednesday, according to the American Gas Association. of the Automobile (AAA, for its acronym in English).

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• What is inflation, what causes prices to rise and how does it affect us?

It was that short-term drop in fuel costs that offset increases in other areas, such as food, housing and electricity.

"You have to look at food and rent very carefully because those are things you can't cut," CNN's global economic analyst Rana Foroohar told "Newsroom."

"A lot of the things that people can cut back on -- going on vacation, buying a new car, buying certain household products -- they're cutting back on those things, and I think that's one of the reasons we're seeing the decline in demand and inflation. But the things that can't be cut, where you live, what you eat... those are the things that concern me."

Food prices rise and affect everyone

Inflation shoots up food prices in Mexico 0:46

Although headline inflation has been stable over the past month, food prices have not fallen.

In fact, the price of food, an index that includes groceries, saw its biggest annual increase since 1979, according to CPI data.

CNN's Vanessa Yurkevich went to a Philadelphia grocery store to talk to shoppers about costs.

She found Ken Elder, a retiree in a faded Grateful Dead T-shirt who lives on Social Security and has changed his daily shopping habits since prices went up.

"Especially in meats, dairy," she said.

• Beef off the table in US households: consumers swap it for chicken amid inflation

Appearing after Yurkevich and Elder on CNN, White House official Gene Sperling said lower gas prices are a start and could save Americans money.

"No one here is suggesting that things are good enough," he told CNN's Ana Cabrera.

"Prices are still too high and they're still hitting, you know, families too hard in line at the grocery store. It's better at the gas station than it was."

Gasoline prices could rise again at any time, depending on what happens with Russia's war in Ukraine and with OPEC, the cartel that drives oil prices.

Housing is a bigger problem

Home prices reach an all-time high in the United States 1:02

Housing, the single largest expense in most households, is a determining factor.

It's a huge element in that core inflation figure that remains high.

Before the CPI report was released, CNN's Martha White took a look at housing, noting that the Fed's effort to fight inflation (raise interest rates) is making buying a home even more expensive.

There has long been a shortage of affordable housing.

White discusses additional reasons, including employers' inability to find workers and ongoing supply chain problems.

You will learn a lot from his report.

I also liked White's recent story about how the economy is confusing everyone right now.

Key line: Companies are hiring, but production is falling.

Consumers are pessimistic about what lies ahead, but they continue to spend.

The economy did one thing when it was supposed to do another, and even professionals are looking for answers.

Don't celebrate.

There's more turbulence ahead

Larry Summers, former Treasury Secretary to Bill Clinton and economic adviser to Barack Obama, has played the role of horsefly for President Joe Biden and the current Federal Reserve, criticizing government spending and the lack of much higher interest rates. before.

He noted that many economic watchers got too excited after a good CPI report in March only to be affected by massive inflation through June.

"I think we just have to maintain a sense of uncertainty and wait for the data to come in," Summers said on MSNBC.

“I still think we have a very serious inflation problem in this country.

I don't think the inflation problem is going to go away on its own.

So I think we're likely to have some pretty turbulent times ahead of us."

Things may not feel cheaper anytime soon

That will be disconcerting to Americans, who probably aren't reading the CPI reports, but are looking at the cost of chicken thighs and shaking their heads.

"How you feel about the economy as an individual is sometimes as important as all the statistics in the world...and I know a lot of people say, 'We still feel like prices are pretty high at the grocery store and gas station.'" Foroohar said.

But for economists, a report like the one on Wednesday suggests the Fed might be able to sustain the landing by raising interest rates and slowing inflation without pushing the economy into recession, something they call a "landing." smooth".

What is not yet clear is whether it is the Fed's actions (successive large rate hikes) or the shock among Americans over high food and energy costs that is slowing inflation.

The Fed will look at not just the CPI report, but also jobs figures released last week that showed much better-than-expected job and wage growth, things that could theoretically prolong inflation, when lawmakers meet to consider further hikes. of the interest rate in September.

On Wall Street, traders were already tempering expectations about the size of further rate hikes.

"The Fed may have a soft landing," former Fed Governor Randall Kroszner told CNN's Matt Egan.

"But that depends on there not being any big negative impacts and everything going well."

And really, after the last few years, who knows what could happen.

Inflation