United States inflation hits 3.4% as Treasury real yields rise

U.S. inflation rose 3.4% annually in July 2026, down from 3.5% in June, according to the Bureau of Labor Statistics. While the monthly consumer price index increased by 0.1%, core inflation—excluding food and energy—grew by 0.2% monthly and 2.5% annually, marking its lowest level in five months.

Real hourly wages decreased by 0.2% annually as nominal wage growth of 3.2% failed to keep pace with the 3.4% inflation rate. Energy prices fell 1.5% monthly, though they remain 14.7% higher than a year ago. Housing costs, which account for approximately one-third of the basket, rose 0.1% monthly and 3.2% annually.

Concurrently, the real yield on the 10-year U.S. Treasury has risen to approximately 2.4%, a significant increase from the post-pandemic period. This upward trend in real yields is driven by a widening U.S. federal deficit and massive private capital demand for artificial intelligence infrastructure, as major technology firms increase borrowing to fund data centers and computational capacity.