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CNN  — 

Good news: Prices were unchanged overall in July, the first month since November 2020 in which prices didn’t rise. We deserve a break!

Bad news: Inflation is still too high, with consumer prices increasing by 8.5% over last July, and is far above the 2% government policymakers think is healthy. Americans are still feeling sticker shock in their daily lives.

Read CNN’s full report on the new Consumer Price Index data released Wednesday.

While fuel costs, gas prices in particular, have eased in recent months, the core annual inflation rate that strips away those more volatile elements such as energy and food rose 5.9% year over year, matching the increase in June.

“When you look at where we have been and put this in perspective, you can see when you compare it to January 2020 it looks like we may be easing,” said CNN’s Rahel Solomon during an appearance on “Newsroom.”

Solomon said a single report like Wednesday’s may not affect the Federal Reserve’s aggressive anti-inflation plan to raise interest rates. It’s a pattern of these types of reports, spread across months, that policymakers are looking for.

Gas prices drop, but …

Gas prices were down 7.7% from June to July, but they are still up 44% compared with a year ago. In the real world, that means gas prices have dropped from a record high average of more than $5 a gallon in early June to a national average of just a penny over $4 on Wednesday, according to AAA.

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

“You’ve got to look at food and rent very carefully because these are things that you can’t cut back on,” said CNN global economic analyst Rana Foroohar, appearing on “Newsroom.”

“A lot of things that people can cut back on – taking a vacation, buying a new car, buying certain products for the home – they are cutting back on those things, and I think that that’s one of the reasons that you’re seeing demand fall and inflation fall. But in the things that you can’t cut back on – where you live, what you eat … those are things that I’m concerned about.”

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Food prices increase, affecting everyone

While overall inflation was flat over the past month, food prices have not fallen.

In fact, the price of food, an index that includes groceries, has seen its largest one-year increase since 1979, according to CPI data.

CNN’s Vanessa Yurkevich went to a Philadelphia grocery store to talk to shoppers about the costs. She found Ken Elder, a retiree in a well-worn Grateful Dead T-shirt living on Social Security who has changed his day-to-day shopping habits since prices have risen. “Especially in meats, dairy,” he said.

RELATED: Here’s what’s getting more expensive at the grocery store

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

“Nobody here is suggesting things are good enough,” he told CNN’s Ana Cabrera. “Prices are still too high and they are still hitting, you know, families too hard at the grocery line. It’s better at the gas pump than it was.”

Gas prices could go up again at any time, depending on what happens with both Russia’s war in Ukraine and with OPEC, the cartel that drives oil prices.

Housing is a bigger problem

Housing, the largest single expense in most households, is a driving factor. It’s an outsize element in that core inflation figure that remains high.

Before the CPI report was released, CNN’s Martha White looked at housing, and noted the Fed’s effort to fight inflation – raising interest rates – is making it even more expensive to buy a house.

There’s a long-standing shortage of affordable housing. White looks at additional reasons, including the inability of employers to find workers and continued supply chain problems. You’ll learn a lot from her report.

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

Key line: Companies are hiring, but output is dropping. Consumers are pessimistic about what lies ahead, but they keep spending. The economy zigged when it was supposed to zag, and even the professionals are searching 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 gadfly to President Joe Biden and the current Federal Reserve, criticizing government spending and a failure to raise interest rates earlier.

He pointed out that many economy watchers got over-excited after a good CPI report back in March only to be hammered by massive inflation reported through June.

“I think we just need to maintain a sense of uncertainty and wait for the data as it comes,” Summers said on MSNBC. “I still think we have a very serious inflation problem in this country. I don’t think that inflation problem is going to go away on its own volition. And so, I think we’re likely to have some quite turbulent times ahead. “

Things might not feel cheaper yet or soon

That will be disconcerting for Americans, who likely aren’t reading 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 just as important as all of the stats in the world … and I know a lot of people are saying, ‘We still feel like prices are pretty high at grocery stores and the pump,’” said Foroohar.

But for economists, a report like Wednesday’s suggests the Federal Reserve might actually be able to stick the landing with interest rate hikes and slow inflation without driving the economy into recession, something they call a “soft landing.”

What’s not yet clear is if it is the Fed’s actions – successive large rate hikes – or sticker shock among Americans at high energy and food costs that is slowing inflation.

The Fed will be looking not only at the CPI report, but also at jobs numbers released last week that showed much better-than-expected job and wage growth – things that could theoretically extend inflation – when policymakers meet to consider more rate hikes in September. On Wall Street, traders were already tempering expectations for the size of new rate hikes.

“It is possible for the Fed to have a soft-ish landing,” Randall Kroszner, former governor at the Federal Reserve, told CNN’s Matt Egan. “But that relies on no big negative shocks and everything going right.”

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