WASHINGTON–New data from the Bureau of Labor Statistics show inflation was up 0.9% in June and up 5.3% year over year, which is likely to raise new debate about when the Fed will move to raise rates. No time soon, says one person.
“Year-over-year measures are still distorted by base effects, but the price index has grown by 9.4% annualized over the last three months, the fastest pace sing 2007,” noted NAFCU’s chief economist, Curt Long. “The headline CPI change was concentrated in areas that were affected by the economic reopening and supply chain shortages, including new and used vehicles, lodging, car rentals, and airfare. Looking ahead, the bigger concern is housing costs. Rental price growth remains fairly modest but has risen three consecutive months and represent a large share of the overall consumption basket. It is also a category that is not likely to fade quickly with the other transitory elements.
“While the latest price data will give the Fed heartburn, it is not likely to prompt a rate hike in the near future as long as unemployment remains elevated,” Long continued. “However, it does mean that Fed tapering is even more likely to occur this year.”