The inflation rate was slower than expected in July, providing some hope that inflation is cooling.
Follow Labor Department Data published on Wednesday. The figure was much lower than estimates, including a Bloomberg survey of 44 economists predicting a rate of 8.7%.
The slowdown in inflation was in large part due to a 7.7% drop in gas prices, but prices for used cars, airline tickets and clothing also fell. However, overall prices are still rising in broad categories such as accommodation and food. Food prices rose 1.1% in July, after rising 1% in June.
For that reason, it may be too early to say that inflation has peaked based on this data, said Greg McBride, chief financial analyst at Bankrate.com.
“To really feel like we’ve hit the top, we need to see a sustained retracement across a range of categories,” he said. “And we don’t see that: Some of the strongest increases in categories like essentials continue, with the fastest rate of food price growth in 43 years.”
“Staying costs continue to rise at a dizzying pace, and with rents slowing down, continued upward pressure from shelter costs is likely to persist for some time.” .
Here are the prices that have increased over the past year for certain household goods and services, according to the Labor Department:
- Gas: 44%
- Airfares: 27.7%
- Electricity: 15.2%
- Food at home: 13.1%
- New car: 10.4%
- Food away from home: 7.6%
- Used cars and trucks: 6.6%
- Shelter: 5.7%
- Skin: 5.1%
- Beer: 4.6%
Expect more rate hikes as long as inflation stays high
To bring inflation down to its standard 2% target level, the Federal Reserve has made four rate hikes in 2022, including two consecutive 0.75% rate hikes in June and July. The federal interest rate is currently 2.25% to 2.50%.
These increases increase borrowing costs, which can slow economic growth. But that also means debt repayment costs will increase for things like credit cards, auto financing, and personal loans.
With inflation continuing to be high – well above the standard rate of 2% – another rate hike seems almost certain when the Fed meets in September. McBride said whether hikes will be possible. whether that interest rate will be 0.5% or 0.75% remains to be considered.
“Whatever progress we’ve seen has to be sustained a month from now, when we get the August CPI report,” he said. “Otherwise, this will be quickly forgotten. So I think it’s a bit early to revise the Fed’s forecast based on a number that may not repeat next month.”
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