Consumer Inflation Surges More than Expected in July

Surging food and energy prices caused a jump in costs for just about everything in July, according to data released Thursday by the Labor Department.

The Consumer Price Index (CPI), a measure of price inflation that includes volatile food and energy prices, increased 0.8 percent in July. Economists had been bracing for a 0.5 percent increase.

Since July 2007, the CPI is up 5.6 percent, the largest yearly increase since January 1991. The CPI has surged at a 10.6 percent annualized rate in the past three months, the second-highest surge in inflation in the past 26 years.

The much more stabile core consumer price index, which excludes food and energy prices, also came in over estimates. The core CPI rose 0.3 percent in the month compared to expectations of 0.2 percent.

Analysts are now speculating that this inflation report will be the final straw for the Federal Reserve holding interest rates steady for the remainder of the year. To combat inflation, most economists are predicting the Fed to raise interest rates before 2009.