Is U.S. inflation stuck at a stubbornly high level or is it steadily cooling? The government's latest report on consumer prices, to be released Wednesday, should provide some hints. It will be closely watched by the inflation-fighters at the Federal Reserve as well as Republicans facing tough midterm elections, not to mention consumers still struggling with high grocery prices. This was reported by Qazaqyia.kz citing Associated Press.

Americans have grappled with worsening inflation since early last year, after tariffs lifted the cost of imported goods. Then this spring, the Iran war raised oil and gas costs, pushing inflation to its highest level in three years. The AI buildout has also increased prices for computer chips and electronic equipment. All three trends could end up having only temporary effects and if they fade, inflation could drop back to the Federal Reserve's 2% target.

Wednesday's inflation report is expected to show that consumer prices rose 3.4% in July from a year earlier, according to a survey of economists by data provider FactSet. That would be down from 3.5% in June and lower than the recent peak of 4.2% in May.

On a monthly basis, prices are expected to have risen just 0.1% from June to July, after they fell in June on sharply lower gas costs.

Excluding the volatile food and energy categories, core inflation may cool for a second month, to 2.5%, down from 2.6% in June, according to FactSet. Core prices — which the Fed pays particularly close attention to — likely rose 0.2% from June to July.

A big reason inflation has cooled in the past couple of months is that gas prices fell after a cease-fire was reached in the U.S.-Iran war. Average gas prices were lower last month than in June, so that should reduce last month's inflation reading. But gas prices rose again in late July and earlier this month, meaning inflation could pick up again when August's figures are released next month, adding a layer of uncertainty.

On Tuesday, gas averaged $4.01 a gallon nationwide, 13 cents higher than a month ago.

Overall, price increases have stayed above the Fed's 2% target for more than five years, suggesting that more than temporary factors may be at work. The cost of services such as healthcare, restaurant meals, and car maintenance are on average rising at more than 3% annually, and they aren't particularly sensitive to gas prices or AI investment.

Rising costs for services often reflect higher wages, as companies charge more to offset the cost of higher pay. But incomes aren't growing fast enough to sustain inflation.