A report showed on Wednesday, that the annual inflation in the United States slowed in July, amid lower gas prices and airline tickets, to come less than expectations that indicated a decline to 8.7%, however, that’s not yet a definitive sign that price increases are starting to take a turn, according to the New York Times.
Consumer prices rose 8.7% in the year to July, a larger slowdown than economists had expected, down from 9.1% in the year to June. The Fed aims to keep inflation at 2% year-on-year, although it targets a linked but separate inflation measure that is falling slightly but abnormally high.
It is not clear whether the decline will continue, because fuel prices are unpredictable and gas prices can rise again. Economists also warned that while inflation is expected to slow in the coming months, it may not be moderate enough, and the Federal Reserve may need to continue working aggressively to bring it down.
After excluding food and fuel costs to learn about underlying price pressures, prices jumped 5.9% during July, matching the previous reading.
On a monthly basis, the price index did not move at all in July. This is due to lower prices for fuel, airline tickets and used cars, which offset increases in rent and food costs.
Core inflation in the US was also slower than economists had expected on a monthly basis, rising by 0.3%. In June, that number was 0.7%. Today’s report will likely be welcome news in the White House and the Federal Reserve, both of which have been waiting for inflation to slow.
But it’s easy to overstate how significant the slowdown in July was. Inflation remains abnormally high. The drop is in large part due to gas prices, and they can always jump again.
There are some real reasons to believe inflation will slow in the coming months: Supply chain stresses, for example, are showing signs of abating. But there are also reasons for concern. Wage growth is still fast, Housing costs, especially rents, continue to rise, which may keep inflation high for some time.