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Here’s the inflation breakdown for July 2024 — in one chart

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Inflation continued to retreat in July, aided by easing price pressures for consumer staples like food and energy and physical goods like new and used cars.

The consumer price index, a key inflation gauge, rose 2.9% in July from a year ago, the U.S. Department of Labor reported Wednesday. That figure is down from 3% in June and the lowest reading since March 2021.

The CPI gauges how fast prices are changing across the U.S. economy. It measures everything from fruits and vegetables to haircuts, concert tickets and household appliances.

“I think it’s right down the strike zone,” Mark Zandi, chief economist of Moody’s, said of the CPI report.

Perhaps the most important thing for consumers is inflation for groceries “continues to grow very slowly,” Zandi said.

Combined with similar good news for other necessities like gasoline and market rents for new tenants, “that’s really encouraging news, particularly for the lower-income consumers that are the most hard pressed,” he added.

Inflation guides Fed interest rate policy

The July inflation reading is down significantly from the 9.1% pandemic-era peak in mid-2022, which was the highest level since 1981.

It’s also nearing policymakers’ long-term target, around 2%.

“We think we’re though the worst of it from an inflation perspective,” said Joe Seydl, senior markets economist at J.P. Morgan Private Bank.

The U.S. Federal Reserve uses inflation data to help guide its interest rate policy. It raised rates to their highest level in 23 years during the Covid-19 pandemic era, pushing up borrowing costs for consumers and businesses in a bid to tame inflation.

Recent labor market data has spooked some investors, who fear it signals a U.S. recession may be near. Many economists say those concerns are overblown, at least for now.

Nonetheless, easing inflation coupled with a cooler labor market make it likely that Fed officials will start cutting interest rates at their next policy meeting in September, economists said. Doing so would reduce borrowing costs, helping buoy the economy.

“In short, this CPI report represents more good data and adds to the evidence supporting a [0.25 percentage point] September rate cut,” Paul Ashworth, chief North America economist at Capital Economics, wrote in a note Wednesday.

Housing is a stumbling block

Housing is the one major impediment keeping inflation elevated above the Fed’s target right now — on paper, at least, economists said.

Shelter is largest component of the CPI, and therefore has an outsized effect on inflation readings.

The shelter index has risen 5.1% since July 2023, accounting for more than 70% of the annual increase in the “core” CPI, the BLS said Wednesday. (The core CPI is economists’ preferred gauge of inflation trends. It strips out food and energy costs, which can be volatile.)

Consumer prices rose 0.2% in July, in line with expectations

After declining to 0.2% in June on a monthly basis, shelter inflation jumped back to 0.4% in July, the BLS reported.

Housing inflation moves up and down at glacial speed due to how the government measures it, economists said. Such data quirks mask positive news in the real-time rental market, which has seen inflation flatline for about two years, Zandi said.

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Excluding shelter — which is likely warranted given measurement issues — “we’re at the Fed’s target and then some,” Zandi said.

“Mission accomplished, in my view,” he said of the fight against inflation.

After stripping out shelter, the CPI rose 1.7% in July, below the Fed’s annual target.

Economists broadly expect shelter CPI inflation to continue to throttle back slowly given prevailing trends for market rents.

Other ‘notable’ categories

Motor vehicle insurance, medical care, personal care and recreation are some other indexes with “notable” increases over the last year, according to the BLS.

Prices in those categories are up 18.6%, 3.2%, 3.4% and 1.4%, respectively.

A surge in new and used car prices a few years ago is likely now fueling high inflation for car insurance premiums and vehicle repair, since it generally costs more to insure and repair pricier cars, economists said.

Insurance inflation should ultimately fade alongside falling car prices, they said. New vehicle prices are down 1% over the past year, and those for used cars and trucks have declined almost 11%.

Egg prices — which had surged in 2022 due to a historic outbreak of bird flu — are rising again following a reemergence of the deadly disease. They’re up 19% from a year ago.

Other food categories including bacon and crackers are up over the past year (by 8.5% and 3%, respectively), but their prices fell during the month of July, suggesting more potential declines ahead.

Overall annual grocery inflation was 1.1% in July, down from an average 11.4% in 2022, which was the highest since 1979.

How supply and demand impacted inflation

Inflation for physical goods spiked as the U.S. economy reopened in 2021. The Covid-19 pandemic disrupted supply chains, while Americans spent more on their homes and less on services such as dining out and entertainment.

It is a different story now. Goods inflation has largely normalized, while the services sector is a fly in the ointment, economists said.

However, services inflation — generally more sensitive to labor costs — should ease further due to a slacker job market and declining wage growth, economists said.

High interest rates have also served to reduce overall inflation by reducing demand, Seydl said.

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As the price of bitcoin falls, you can leverage this tax loophole

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With the price of bitcoin down from a record high in January, there’s a chance for some investors to score a tax break, experts say.  

Following a post-election rally, the flagship digital currency touched $109,000 on inauguration day before falling in February. As of midday Friday, the price was around $84,000, after dipping below $80,000 overnight, according to Coin Metrics.

The latest selloff presents a tax planning opportunity, including a “loophole” that could go away amid Congressional tax negotiations, according to Andrew Gordon, a tax attorney, certified public accountant and president of Gordon Law Group.

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The strategy, known as “tax-loss harvesting,” allows you to offset profitable investments by selling declining assets in a brokerage or other taxable account. Once your losses exceed gains, you can subtract up to $3,000 per year from regular income and carry excess losses into future years. 

Some investors wait until December for tax-loss harvesting, which can be a mistake because asset volatility, particularly for digital currency, happens throughout the year, experts say. 

“You should look for these opportunities continually and take advantage of them as they occur,” Gordon said.  

You should look for these opportunities continually and take advantage of them as they occur.

Andrew Gordon

President of Gordon Law Group

The crypto wash sale ‘loophole’ 

When selling investments, there’s a wash sale rule, which blocks you from claiming a loss if you repurchase a “substantially identical” asset within a 30-day window before or after the sale.

But currently, the wash sale rule doesn’t apply to cryptocurrency, which can be beneficial for long-term digital currency investors, experts say.

“If you sell, for instance, bitcoin at a loss today and then buy it back tomorrow, you still have your loss on the books,” Gordon said. “This is an extremely effective strategy for crypto investors because they don’t have to exit their position.”

However, the strategy could disappear in the future as Congressional Republicans seek ways to fund President Donald Trump‘s tax agenda.

Sens. Cynthia Lummis, R-Wyo. and Kirsten Gillibrand, D-N.Y., in 2023 reintroduced a regulatory framework for cryptocurrency, which included closing the crypto wash sale loophole. Former President Joe Biden‘s fiscal year 2025 budget also included the proposal.

In the meantime, “the IRS gives us this loophole. We may as well take it,” Adam Markowitz, an enrolled agent at Luminary Tax Advisors in Windermere, Florida, previously told CNBC.

Of course, you should always consider your investing goals and timeline before implementing the tax strategy.

Tax Tip: Crypto Assets

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Americans are suffering from ‘sticker shock’ — here’s how to adjust

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A worker stocks eggs at a grocery store in Washington, D.C., on Feb. 12, 2025.

Tom Williams | CQ-Roll Call, Inc. | Getty Images

Whether it’s a dozen eggs or a new car, Americans are having a hard time adjusting to current prices.

Nearly all Americans report experiencing some form of “sticker shock,” regardless of income, according to a recent report by Wells Fargo.

In fact, 90% of adults said they are still surprised by the cost of some goods, such as a bottle of water, a tank of gas, dinner out or concert tickets, and said that the actual costs are between 55% and 200% higher than what they expected depending on the item.

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Many Americans are still cutting back on spending, making financial choices and delaying some life plans, the Wells Fargo report also found. The firm polled more than 3,600 consumers in the fall.

“The value of the dollar and what it is providing may not be as predictable anymore,” said Michael Liersch, head of advice and planning at Wells Fargo. As a result, “consumer behaviors are shifting.”

Still, adjusting to a new normal takes time, he added: “Habit formation does take a while. Next year what you can imagine seeing is consumers being a little less surprised or shocked by prices and adapting to the current situation to create that goals-based plan.”

Some change is already apparent. Although credit card debt recently notched a fresh high, the rate of growth slowed, which indicates that shoppers are starting to lean less on credit cards to make ends meet in a typical month, according to Charlie Wise, TransUnion’s senior vice president of global research and consulting.

“After years of very high inflation, they are kind of figuring it out,” Wise said. “They’ve adjusted their baseline for what things cost right now.”

But with President Donald Trump‘s proposed 25% tariffs on imports from Canada and Mexico set to take effect in March, there is also the possibility that prices will rise even further in the months ahead.

Consumers fear inflation will pick up

Mexico and Canada tariffs could put pressure on some consumer staples, experts say. That includes already high grocery prices, which are up 28% over the last five years, according to the Bureau of Labor Statistics.

The prospect of tariffs and renewed inflation is weighing heavily on many consumers

The Conference Board’s consumer confidence index sank in February, notching the largest monthly drop since August 2021. The University of Michigan’s consumer sentiment index similarly found that Americans largely fear that inflation will flare up again.

A recent CreditCards.com survey found that 23% of Americans expect to worsen or go into credit card debt this year, in part because they are making more purchases ahead of higher tariffs.

How to battle sticker shock

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There’s still time to lower your 2024 taxes or boost your refund

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With tax season well underway, you may be eager for strategies to reduce your 2024 taxes or boost your refund. However, there are limited options, especially for so-called “W-2 employees” who earn wages, experts say.

After Dec. 31, there are “very few” tax moves left for the previous year, according to Boston-area certified financial planner and enrolled agent Catherine Valega, founder of Green Bee Advisory.

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Once the calendar year ends, it’s too late to claim a tax break by boosting 401(k) plan deferrals, donating to charity or tax-loss harvesting.

But there are a few opportunities left before the April 15 tax deadline, experts say. Here are three options for taxpayers to consider. 

1. Contribute to your health savings account

If you haven’t maxed out your health savings account for 2024, you have until April 15 to deposit money and score a tax break, experts say.

For 2024, the HSA contribution limit is $4,150 for individual coverage or $8,300 for family plans. However, you must have an eligible high-deductible health insurance plan to qualify for contributions.  

“The HSA is easy,” said CFP Thomas Scanlon at Raymond James in Manchester, Connecticut. “If you are eligible, fund it and take the deduction.” 

Tax Tip: IRA Deadline

2. Make a pre-tax IRA deposit

The April 15 deadline also applies to individual retirement account contributions for 2024. You can save up to $7,000, plus an extra $1,000 for investors age 50 and older.

You can claim a deduction for pre-tax IRA contributions, depending on your earnings and workplace retirement plan.

The strategy lowers your adjusted gross income for 2024, but the account is subject to regular income taxes and required withdrawals later, said CFP Andrew Herzog, associate wealth manager at The Watchman Group in Plano, Texas.

“A traditional IRA simply delays taxation,” he added.

A traditional IRA simply delays taxation.

Andrew Herzog

Associate wealth manager at The Watchman Group

3. Leverage a spousal IRA

If you’re a married couple filing jointly, there’s also a lesser-known option, known as a spousal IRA, which is a separate Roth or traditional IRA for nonworking spouses.  

Married couples can max out a pre-tax IRA for both spouses, assuming the working spouse has at least that much income. It’s possible to claim a deduction for both deposits.

But whether you’re making a single pre-tax IRA contribution or one for each spouse, it’s important to weigh long-term financial and tax planning goals, experts say.

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