U.S. consumer prices rose at a slower pace in July as gas prices fell and supply chains improved, but inflation held near its highest level in 40 years.

The Bureau of Labor Statistics' July Consumer Price Index (CPI) reflected a year-over-year increase of 8.5% last month, down from June's 40-year high of 9.1%. Consensus economists were expecting last month's reading to show an 8.7% increase, according to estimates compiled by Bloomberg.

Core CPI, which excludes the volatile food and energy components of the report, rose 5.9%, unchanged from 5.9% in June.

(This post is breaking. Please check back for updates.)

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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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