A Bit of Inflation Relief in July – Kiplinger’s Personal Finance

Consumer prices were unchanged, on average, in July because of a large drop in gasoline prices and a smaller decline in natural gas from the previous month. While lower prices at the gas pump are a welcome respite for drivers, prices still rose strongly for basics like food, rent and new vehicles. The annual inflation rate edged down to 8.5% from 9.1% in June. 

There were a few breaks in the relentless pace of price increases. Appliance prices are coming down, along with sporting goods, men’s clothing, car rentals and hotel rates. Airfares dropped because of lower fuel costs, and used-car prices edged down. All of these were enough to bring down non-energy, non-food price increases to a moderate level.

But this will likely not be enough to completely mollify the Federal Reserve. The lower July inflation report was welcome, of course, and it likely will keep the central bank to its expected half-point interest rate hike in September instead of a larger one, but the Fed knows that still-strong wage increases are going to keep upward pressure on prices in general. It will probably take several months in a row of tamer inflation before the Fed will feel that the trend has changed. Expect inflation at the end of the year to be around 8.0%, down a bit from the peak of 9.1% in June, but still high.

Source: https://www.kiplinger.com/personal-finance/inflation/605061/a-bit-of-inflation-relief-in-july

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