Inflation rises in July following a year of declines
U.S. inflation rose in July after 12 straight months of declines, boosted by costlier housing, the Associated Press reports. Excluding volatile food and energy prices, however, so-called core inflation matched the smallest monthly increase in nearly two years.
The inflation figures the government reported showed that consumer prices increased 3.2% from a year earlier. That was up from a 3% annual rise in June, which was the lowest rate in more than two years. The July inflation figure remained far below last year’s peak of 9.1%, though still above the Federal Reserve’s 2% target.
The Fed, economists and investors, though, pay particular attention to the core inflation figures for signs of where inflationary pressures might be headed. From June to July, core inflation remained a tame 0.2%.
Today’s price data will be among the key barometers the Fed will weigh in deciding whether to continue raising interest rates. In its drive to tame inflation, the Fed has raised its benchmark rate 11 times since March 2022 to a 22-year high.
A jump in energy prices has rekindled some of the inflation pressures underlying the economy. Gasoline prices have surged nearly 30 cents over the past month to a national average of $3.83 a gallon.
Now, the Fed faces a daunting problem: persistent inflationary pressures in service businesses — restaurants, hotels, entertainment venues, and the like — where wages represent a substantial share of costs. Worker shortages have led many of these services companies to sharply raise pay.
Still, economists caution against reading too much into one month of numbers. Many of them expect inflation to continue trending lower.