In July, rising rents were mostly offset by lower prices for cars and furniture, which could persuade the Federal Reserve to keep interest rates unchanged next month.

The Labor Department report indicated underlying inflation pressures decreased last month, with prices without food and energy rising at the slowest rate in over two years.

This positive inflation report cements expectations for the Fed to leave rates unchanged at the September meeting.

The 12-month CPI rose 3.2% through July, the lowest since March 2021.

The annual CPI rate rose for the first time in 13 months after prices fell in July after a spike that had raised inflation to a 40-year high.

Consumer prices fell from 9.1% in June 2022, The Fed targets 2% inflation.

The dollar sank against a basket of currencies as U.S. stocks rose and treasuries climbed.

Initial claims for state unemployment benefits rose 21,000 to 248,000, boosting inflation expectations.

The economy added 187,000 jobs last week, the second-lowest since December 2020, keeping pay rises high.

Economists expect labor expenses to fall as worker productivity rises.