June-to-July changes in a selection of categories of the Consumer Price Indexĭespite all those positive developments, costs continue to climb rapidly across many goods and services. The slowdown in core prices, which strip out volatile food and fuel costs to give a sense of the underlying trend, was more pronounced than economists had expected. That said, the report contained other good news: Airfares came down in price, which was expected, but so did the cost of apparel, hotel rooms and used cars. And a big chunk of the pullback in July came from dropping gas prices, as the average cost of a gallon of fuel began to fall back toward $4 after peaking at $5 in June.įuel costs are notoriously volatile, and with Russia’s invasion of Ukraine injecting heightened geopolitical tensions, officials are unlikely to stake victory on a slowdown that could quickly reverse itself. While costs finally stopped increasing at an accelerating rate, they are still climbing at an unusually rapid clip, making everyday life expensive for consumers. What today’s report means for the Federal Reserve.Ĭonsumer Price Index inflation cooled meaningfully in July as gas prices declined, which is good news for the Federal Reserve, though not yet enough for policymakers to conclude that America is through the worst of its burst of rapid price increases. And housing costs, particularly rents, continue to climb, which could keep inflation high for some time. There are some real reasons to believe inflation will slow in the months ahead: Supply chain pressures, for instance, show signs of easing.īut there are also reasons to worry. The decline owed in large part to gas prices, and they can always jump again. The report is probably welcome news at the White House and the Federal Reserve, both of which have been waiting for inflation to decelerate.īut it’s easy to overstate how much the slowdown in July matters. That’s because prices for fuel, airfares and used cars declined, offsetting increases in rent and food costs.Ĭore inflation was also slower than economists had expected on a monthly basis, climbing by 0.3 percent. On a monthly basis, the price index did not move at all in July. After stripping out food and fuel costs to get a sense of underlying price pressures, prices climbed by 5.9 percent through July, matching the previous reading. The Consumer Price Index climbed 8.5 percent in the year through July, compared with 9.1 percent the prior month, a bigger slowdown than economists had projected. Inflation cooled in July as gas prices and airfares fell, a welcome reprieve for consumers and economic policymakers but not yet a conclusive sign that price increases are turning a corner.
Year-over-year percentage change in the Consumer Price Index print cooling off,” said Gargi Chaudhuri, the head of investment strategy for the Americas at BlackRock’s iShares.Īnd yet, the S&P 500 is up nearly 15 percent from its low in June. “I don’t think any decisions can be made based on just this one C.P.I. Some investors have warned it is unrealistic to predict that inflation as measured by the Consumer Price Index can slow without severe effects on the economy. interest rates not rising as high as previously thought also pushed down the dollar, which fell more than 1 percent against a basket of currencies of major trading partners. government bonds, which are sensitive to trends in inflation and monetary policy, also reacted to the data, with its yields - a benchmark for borrowing costs - falling, especially for shorter-term debt, which is more influenced by the Fed’s actions. “Equities are taking it certainly positively with the hope that the Fed may need to be less aggressive in their rate hiking cycle,” he said, describing the view that the Fed may be able to slow down its rate increases if inflation continues to moderate. That scenario is seen as good for stocks, said Matthew Luzzetti, the chief U.S. rates strategist at Bank of America, probably “confirms that we’ve seen the peak of Fed hawkishness already.” “This peak in inflation that we’ve probably seen,” said Meghan Swiber, a U.S. The expectation that inflation will begin to subside has helped improve investor sentiment recently, bolstered by signs that despite the Federal Reserve’s aggressive interest rate increases, companies remain profitable and the jobs market is still in good shape. The benchmark stock index now sits at its highest level since early May. The rally pushed the index into positive territory for the month, extending the big gains recorded in July. The S&P 500 index rose 2.1 percent, regaining all the ground lost in declines recorded in the past four sessions, and then some. Stocks jumped on Wednesday, following news that inflation moderated in July.
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