U.S. inflation shows signs of peaking as prices hold steady

U.S. inflation slowed more than expected in July, reflecting lower energy prices, which could ease pressure on the Federal Reserve to keep raising interest rates sharply.

Data from the Labor Department on Wednesday showed the consumer price index rose 8.5% from a year earlier, down from a 9.1% gain in June and the biggest gain in 40 years. Prices were unchanged from the previous month. The drop in gasoline offset increases in food and housing costs.

The so-called core CPI, which strips out the volatile food and energy components, rose 0.3 percent from June and 5.9 percent from a year earlier.

Economists polled by Bloomberg expect the headline CPI to rise 0.2% from a month ago and 8.7% from a year earlier. Core CPI is expected to rise 0.5% from June and 6.1% from a year earlier.

U.S. Treasury yields slipped on the curve, while S&P 500 futures extended gains and the dollar tumbled. Traders cut the odds of the Fed raising interest rates next month by three-quarters.

living cost

While falling gasoline prices are good news for Americans, their cost of living remains painfully high, forcing many load on credit cards and consume savings. After last week’s data showed still strong labor demand As well as firmer wage growth, a further slowdown in inflation could lessen the urgency for the Fed to extend its aggressive rate hikes.

Gasoline prices fell 7.7% in July, the most since April 2020, after rising 11.2% in the previous month. Utility prices fell 3.6% from June, the biggest drop since May 2009.

However, food costs rose 10.9% from a year ago, the highest level since 1979. Used car prices fell.

Despite slowing inflation, Fed officials say they want to see months of evidence that prices are cooling, especially in nuclear Measurement. They will release another round of monthly CPI and employment reports ahead of their next policy meeting on Sept. 20-21.

Housing costs, the largest service sector component and accounting for about a third of the overall CPI, rose 0.5% from June and 5.7% from a year earlier, the highest level since 1991. This reflects a 0.7% increase in prime rents for residential. Meanwhile, hotels fell 3.2%.

In other leisure sectors, airfares fell 7.8% from the previous month, the biggest drop in nearly a year.

— With assistance from Kristy Scheuble and Reade Pickert.

sign up Wealth characteristics Email list so you don’t miss our biggest features, exclusive interviews and surveys.

Source link