WASHINGTON—Inflation’s relentless upward pace took something of a breather during July, when on a seasonally-adjusted basis, overall consumer prices were unchanged over the prior month but were still up considerably over one year earlier.
Data from the Bureau of Labor Statistics show the overall consumer price index (CPI) grew by 8.5% over the 12-month period, marking the slowest month-over-month growth in prices since April 2020.
“Energy prices were a key contributor to the slowdown, as gas prices fell 7.7% during the month,” noted NAFCU Chief Economist and Vice President of Research Curt Long. “Separately, airfares also dropped by 1.8% following a 12.6% increase in June as jet fuel costs fell.”
‘Slowed Considerably’
Energy prices fell by 4.6 % during the month. From a year ago, energy prices were up 32.9 %. Additionally, food prices climbed 1.1% in July and are up 10.9% compared to this time last year.
"Stripping out food and energy, core inflation slowed considerably from 0.7% growth in June to 0.3% last month,” noted Long. "Housing costs grew by 0.7%, which is down a tick from June.”
Year-over-year core CPI growth was 5.9%.
"All in all, the CPI report was excellent and comes as welcome relief from the under-fire Federal Reserve," concluded Long. "Markets are fairly evenly split on whether to expect a 50- or 75-basis point hike from the FOMC in September, and that question will most likely depend on the incoming data over the next month."
CUNAS’s Perspective
CUNA Senior Economist Dawit Kebede said how the Fed proceeds with rates will depend on a new report.
“Housing prices, which comprise a third of the Consumer Price Index (CPI) basket, increased by an annualized 6% rate in July. There is a lag up to 18 months between house price increases and its full inclusion in the CPI measure. Hence, we will see more increases in shelter CPI in the coming months,” Kebede said.
“We had a strong jobs report and growing wages earlier this week that could potentially signal another aggressive rate hike from the Federal Reserve,” he continued. “However, this inflation report indicates slowing down in some areas despite visible price pressures in others. There will be one more employment and inflation report before the data-driven Federal Reserve meets in September to decide on further rate hike.”