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U.S. import prices posted their first drop in seven months in July, the Labor Department said on Friday, due to lower costs for petroleum and non-petroleum products.

Import prices fell 1.4% more than expected last month after rising 0.3% in June, the data showed. This is the largest monthly decline since April 2020. In the 12 months to July, import prices rose 8.8% after rising 10.7% in June .

Economists polled by Reuters had forecast import prices, which exclude tariffs, to fall 1.0% from June.

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The report follows other tentative signs earlier this week that inflation has peaked, with U.S. consumer prices unchanged in July due to a sharp drop in the cost of gasoline, after rose 1.3% in June, although underlying price pressures remained elevated. Producer prices also fell last month due to lower energy costs.

The Federal Reserve is considering whether to raise its benchmark overnight lending rate by another 50 or 75 basis points at its next policy meeting on September 20-21, as the U.S. central bank battles to cool demand across the economy and bring inflation back to its 2% target. The Fed has raised its key rate by 225 basis points since March.

Imported fuel prices fell 7.5% last month after jumping 6.2% in June. Oil prices fell 6.8%, while the cost of imported food fell 0.9%, the biggest one-month drop since November 2020.

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Excluding fuel and food, import prices fell by 0.5%. These so-called core import prices fell 0.6% in June. They increased by 3.8% over one year in July. The strength of the US dollar is helping to contain the prices of basic imports.

The dollar has appreciated by about 10% against the currencies of the main trading partners of the United States since the beginning of the year.

The report also showed export prices fell 3.3% in July after accelerating 0.7% in June. Prices for agricultural exports fell 3.0%, with the drop mainly attributable to lower prices for soybeans, wheat and cotton.

Non-agricultural export prices fell 3.3%. Export prices rose 13.1% year-on-year in July after rising 18.1% in June. (Reporting by Lindsay Dunsmuir; Editing by Paul Simao and Mark Heinrich)

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