WASHINGTON–New data indicate the pace of inflation is cooling following the Fed’s year-plus efforts to raise rates.
According to the new numbers, the Consumer Price Index climbed 3.2% in the year through July, the first acceleration in 13 months following a 3% reading in June.
"Month-over-month headline and core inflation increased by 0.2%, continuing a long-term trend of slower growth driven by a weakening economic landscape,” said NAFCU Economist Noah Yosif. “A slow but steady cooldown in core inflation driven by lower shelter and auto prices suggests that interest-sensitive spending has begun to feel the weight of rising interest rates.
“July’s print, while the first of two snapshots on inflation before the FOMC reconvenes in September, reinforces the market view of a pause in the tightening cycle,” Yosif continued. “Given a shrinking window of time for the Federal Reserve to synchronize monetary policy with a broader slowdown in economic activity, NAFCU expects August’s numbers will be even more vital to providing additional confirmation of progress achieved on inflation."
CUNA: Hitting the Target
"The Consumer price index for headline and core items increased by 0.2% in July, the same slower pace as in June. The headline inflation over the last 12 months ticked up from 3% last month to 3.2% as expected. This increase is mainly due to comparison a lower base with July prices last year when monthly inflation remained flat," said CUNA Senior Economist Dawit Kebede. "The Index for housing is still the largest contributor to the monthly increase accounting for 90% of the headline change. The price for several items such as air fares, used and new trucks, medical care, communications, and household furnishing declined in July.
"This report indicates that inflation continued to cool down. The annualized inflation measure of the average for last three months which exclude lagged housing is about 2%. Another indication that prices are going in the direction of the Federal Reserve's target."
Where Prices Fell
According to the new federal data, airfares fell sharply, hotel costs eased and used cars became cheaper in July. Rent prices have also been moderating.
The Fed has its benchmark rate currently set at a range of between 5.25% and 5.5%.