US: inflation eases as consumer prices rise 6.3% in July

Inflation eased last month as energy prices tumbled, raising hopes that rising costs for everything from gasoline to food have peaked.

According to a Commerce Department report on Friday that is closely watched by the Federal Reserve, consumer prices rose 6.3% in July from a year earlier after posting a 6.8% annual increase in June, the biggest jump since 1982. Energy prices made the difference in July, falling last month after rising in June.

So-called core inflation, which excludes volatile food and energy prices, rose 4.6% last month from a year earlier after rising 4.8% in June. The drop, along with a decline in the Labor Department’s consumer price index last month, suggests inflation pressures may be easing.

On a monthly basis, consumer prices actually fell 0.1% from June to July; core inflation rose 0.1%, the Commerce Department reported.

Inflation began to rise sharply in the spring of 2021 as the economy recovered with startling speed from the brief but devastating coronavirus downturn a year earlier. Rising customer orders overwhelmed factories, ports and freight yards, leading to delays, shortages and higher prices. Inflation is a global problem, especially since the Russian invasion of Ukraine pushed up global food and energy prices.

Fed chairman’s speech

The Federal Reserve was slow to respond to rising inflation, thinking it was the temporary result of supply chain bottlenecks. But as prices continued to rise, the US central bank acted aggressively, raising its benchmark interest rate four times since March.

Fed Chairman Jerome Powell is scheduled to give a speech Friday at an economic conference in Jackson Hole, Wyoming, where he is expected to discuss the Fed’s plans for future interest rate hikes.

“It’s true that, with headline PCE inflation still at 6.3% and core PCE inflation at 4.6%, we don’t expect the Fed to suddenly announce a pivot in Jackson Hole,” said Paul Ashworth, chief economist for North America. Northern Capital Economics, in a statement. research note “But even better news on inflation in the coming months is likely to convince the Fed to change course next year, despite any aggressive rhetoric coming from officials now.”

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