The report also contained encouraging news, though. On a month-to-month basis, inflation was 0.2%, in line with expectations. The past few months have seen increases that would translate to about a 2.4% annual rate, not far from the Fed’s 2% target.

“Inflation is slowly winding back down after exploding during the pandemic shortages and spike in oil prices after Russia invaded Ukraine last February,” wrote Christopher Rupkey, the chief economist for FWDBONDS.

Meanwhile, “core inflation,” which strips out volatile food and energy prices, rose to 4.7% in the year ending in July. Still, core inflation has trended down this year.

Soaring inflation has battered households over the past two years and eroded support for President Joe Biden and his economic agenda. Republicans used the rising prices as a weapon to attack the administration and blamed big spending bills, such as Biden’s pandemic relief legislation, as major drivers of inflation.

But a slew of recent positive economic data has helped the administration to pivot toward a messaging campaign focused on the bright spots in the economy, with the White House branding the developments as proof of “Bidenomics” in action.

The labor market is still going strong, defying expectations from six months ago that the economy could be entrenched in a recession by now. While job growth slowed to 187,000 last month, it remains positive, and the unemployment rate is sitting at a historically low 3.5% level, matching where it was just before the pandemic took hold.

Additionally, GDP growth for the second quarter outpaced consensus expectations at a 2.4% annual rate, showing that the economy is humming right along despite the Fed raising interest rates to the highest level in more than two decades.

Over the past two years, consumers have been buffeted by higher prices.

The rising cost of food, in particular, has been difficult for many households. The price of bread has risen 9.5% over the last year, while fats and oils have increased in price by 6.3%.

Meanwhile, some energy products, such as gasoline, fell on a month-to-month basis, and many items were down heavily from the year before. Regular unleaded gasoline fell nearly 20% on an annual basis, while motor oil dropped 20.2%.

The Fed has raised rates by an aggressive degree over the past 17 months, at times conducting rate revisions three times the size of the typical increase. Many economists, given some indications of a slowing labor market and the declines in inflation, expect that the Fed’s quarter-of-a-percentage-point hike last month will be the last of this year.

After the report, investors put a 90% chance on the Fed holding rates steady at its next meeting in September, according to CME Group’s FedWatch tool, which calculates the probability using futures contract prices for rates in the short-term market targeted by the Fed.

At a recent press conference, Fed Chairman Jerome Powell revealed that central bank staff no longer expect a recession, further bolstering the notion that the Fed can pull off an elusive “soft landing.” That announcement was significant because just months before, it was revealed that Fed staff had been penciling in a mild recession this year.

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While the overall economy has held up strikingly well despite the rate revisions, the hikes have trickled down to consumers in the form of rising mortgage rates, making housing more unaffordable and hobbling the previously red-hot housing market.

Mortgage rates have risen to over 7%, the highest since November and a far cry from the sub-3% bargain mortgage rates consumers locked in at the height of the pandemic.