Core CPI Climbed 2.5% in July, Excluding Food and Fuel

Core CPI — the Consumer Price Index for all items less food and energy — rose 0.2% in July on a seasonally adjusted basis and 2.5% over the prior 12 months on a not-seasonally-adjusted basis, the Bureau of Labor Statistics reported August 12, 2026. It is the government's standard measure of underlying price trends, calculated by removing two of the most volatile categories from the broader index.

What Is Core CPI and How Does It Differ From Headline CPI?

Headline CPI covers the full consumer basket: everything households buy, from groceries and gasoline to rent, medical care, apparel, and vehicles. In the same July 2026 report, the BLS put headline CPI at +0.1% for the month, seasonally adjusted, and +3.4% over the prior year, not seasonally adjusted. Core CPI is a subset of that same basket, calculated with food and energy items removed before the index is built.

The gap between the two figures in July — 2.5% for core versus 3.4% for headline — reflects how much food and energy prices moved relative to the rest of the basket over the preceding year. The BLS publishes both figures every month as part of the same release, alongside detailed sub-indexes for individual categories such as shelter, medical care, apparel, and transportation, so the two headline numbers are always directly comparable month to month.

Both figures are drawn from the same monthly price-collection effort across urban areas nationwide, so core CPI is not a separately sampled index. It is a recalculation of the identical underlying dataset with two categories excluded, which is why the BLS can publish it in the same monthly release rather than on a separate schedule or with a reporting lag.

Why Track an Index That Leaves Out Food and Energy?

Core CPI exists as a separate published line item specifically because the BLS breaks it out as "all items less food and energy" in its monthly release. The measure is one of several indexes the bureau reports alongside headline CPI, giving analysts a version of the index built on a narrower basket. Because it is published on the same monthly schedule as headline CPI, core CPI lets analysts compare the two side by side without waiting for a separate report.

The distinction matters for anyone reading a single month's inflation report in isolation. Because core and headline CPI are published together, a reader comparing this month's release to last month's can see, from the BLS's own figures, how much of any swing in the topline number came from the excluded categories versus the rest of the basket. The BLS report itself makes both figures available side by side for that comparison, without requiring outside estimates or additional calculation.

Neither figure is inherently the "correct" reading of inflation. Headline CPI reflects what households actually pay across every category they buy, including the categories that swing most sharply from month to month. Core CPI removes those categories from the calculation entirely rather than adjusting for their volatility, which is a distinct methodological choice from smoothing or averaging the data over time.

Why Does the Federal Reserve Watch a Different Index Entirely?

The Federal Reserve does not target CPI at all. The Federal Open Market Committee has stated that inflation of 2% over the longer run, "as measured by the annual change in the price index for personal consumption expenditures, is most consistent with the Federal Reserve's mandate," according to the Federal Reserve Board's public FAQ on its inflation objective. The PCE price index is compiled by the Bureau of Economic Analysis, not the BLS, and draws on a broader set of spending data, including purchases made on consumers' behalf by employers and government programs, rather than only the household-reported purchases that anchor CPI.

The Fed's own explanation does not detail why PCE is preferred over CPI, only that it is the index written into the FOMC's longer-run goals statement. The two measures track similar trends but rarely produce identical readings in a given month, since they draw on different source data and different category weighting within the basket. For a reader following both a CPI release from the BLS and a Personal Income and Outlays release from the BEA in the same month, that difference in method — not a sudden change in prices themselves — is often the simplest explanation for two different headline numbers describing a similar period.

The BEA reported the PCE price index up 3.7% from a year earlier for June 2026, in its July 30, 2026 release. That reading, like CPI, is published monthly and covers a different reference month than the BLS's July CPI figures, since the two agencies work on offset release schedules.

Where Do the Numbers Stand Right Now?

The BLS is scheduled to release the August 2026 CPI report on September 11, 2026. The BEA's next Personal Income and Outlays report, which contains the PCE price index, is scheduled for August 26, 2026, covering July 2026 data. Both releases will allow a direct comparison against the figures above, using the same methodology each agency applied this month.

How Should Readers Use Core Inflation Figures?

Core CPI and PCE are economic indicators, not investment guidance. Neither the BLS nor the BEA issues forecasts of future price levels, interest rates, or market direction alongside these releases; any forward-looking read on where inflation or rates are headed belongs to named institutions that publish their own projections, dated and attributed. This site does not predict inflation, rates, or markets.

What the two agencies do provide, every month, is a documented, reproducible calculation: a defined basket, a defined exclusion set, and a defined collection period. That transparency is what lets core CPI, headline CPI, and PCE be compared against each other and against prior months without relying on any outside interpretation of what the numbers mean.

For a related trends perspective, read Core CPI Rose 2.5% Year Over Year in July.