Inflation Gauge Preferred by Fed Edges Up, But Still Above Target

inflation-gauge-preferred-by-fed-edges-up-but-still-above-target

An inflation measure that the Federal Reserve constantly monitors stayed low last month, supporting indications that price increases are slowing, and increasing the chance that the Fed will maintain interest rates at its upcoming meeting in late September.

According to the Commerce Department’s report released on Thursday, prices increased little for the third consecutive month in July, rising just 0.2% from June. 

Prices increased 3.3% year over year in July, up from a 3% annual increase in June. Though it is still more than the Fed’s 2% inflation objective, the year-over-year figure is far lower than the 7% peak it achieved a year ago.

The most recent data comes in the wake of other recent figures that indicate the labor market and economy may be slowing just enough to reduce inflationary pressures. 

For instance, the number of job postings that were advertised fell in July, and fewer Americans are leaving their employment in search of better chances.

Read Also: Alligator Warning Issued Amid Fears Reptiles Could Lurk in Floodwaters After Hurricane Idalia

Fed Watches Core Prices for Inflation Signals

inflation-gauge-preferred-by-fed-edges-up-but-still-above-target
An inflation measure that the Federal Reserve constantly monitors stayed low last month, supporting indications that price increases are slowing, and increasing the chance that the Fed will maintain interest rates at its upcoming meeting in late September.

 Both factors lessen the demand on businesses to increase compensation in order to attract and retain employees, a move that frequently leads to inflation when businesses raise prices to make up for their increased labor costs.

When volatile costs for food and energy are excluded, core inflation increased by the same 0.2% from June to July as it did from May to June. Core prices increased 4.2% over the previous year, up from 4.1% the month prior. 

The significantly smaller price hikes from a year ago contributed to the increase in the core figures year over year. Policymakers at the Fed keep a close eye on core prices as a warning indicator of potential future inflation.

The individual consumption expenditures price index, a different inflation indicator from the more well-known consumer price index, was released on Thursday. 

The government announced earlier this month that the CPI increased 3.2% from a year earlier in July, down from a peak of 9.1% in June 2022.

Read Also: Big Banks Face New Rules on ‘Living Wills’ and Debt in Wake of Crisis

Source: Independent, Yahoo Finance

Leave a Reply

Your email address will not be published. Required fields are marked *