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By Heather Scott and Julie Chabanas
US inflation eased slightly in July, according to official data Wednesday, potentially taking pressure off the Federal Reserve to hike interest rates sharply while bringing a much-needed boost to President Joe Biden just months before crucial midterm elections. news online
With energy costs dropping in recent weeks, the consumer price index dipped to an annual rate of 8.5 percent last month, the Labor Department reported, lower than markets were projecting.
Fueled by aggressive consumer spending of pandemic savings, global supply chain snarls, domestic worker shortages and Russia’s war on Ukraine, inflation soared 9.1 percent on-year in June, the highest in 40 years.
But the CPI was unchanged compared to June, a dramatic shift from the big increase in the prior month and defying expectations of a modest rise.
“Today we received news that our economy had zero percent inflation in the month of July. Zero percent,” Biden said at a White House event.
“We are seeing signs that inflation may be beginning to moderate,” he said, although he acknowledged that the global challenges remain and the economy could face “additional headwinds.”
When volatile food and energy prices are excluded from the calculation, the so-called core CPI rate rose just 0.3 percent — the smallest in four months, according to the report.
Soaring prices have continued to climb in the United States, squeezing family budgets and, by extension, Biden’s popularity.
Biden’s opponents accuse the president of precipitating inflation with a gigantic $1.9 trillion coronavirus relief package, enacted in March last year shortly after assuming office.
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And Republicans renewed their criticism of Biden’s economic policy, warning that Sunday’s passage in the Senate of his massive climate and health care bill titled the “Inflation Reduction Act,” would do the opposite of its stated purpose.
But the president said his economic policies are working.
In addition to cooling inflation “jobs are booming” and wages are rising “That’s what happens when you build an economy from the bottom up from the middle out,” he said
“Our work is far from over… (but) the economic plan is working.”
- Devil in the details –
Still, the devil is in the details.
Economists caution against taking too much solace from a single good report, and they worry that the inflation slowdown linked to the drop in gasoline prices could be outweighed by rising rent and real estate prices.
The question now facing Washington is whether it will be possible to bring inflation down without plunging the world’s largest economy into recession, after two quarters of economic contraction in the first half of the year.
In a bid to tamp down inflation, the Fed has already hiked the interest rate four times to a range of 2.25 to 2.5 percent, including two consecutive 75-basis-point increases.
Fed officials have made it clear that a third jumbo rate increase remains on the table at next month’s policy meeting.
“One month’s data is too volatile to call a peak in inflation,” said Joseph Gagnon of the Peterson Institute for International Economics.
“If August data are the same, it takes 75 basis points off the table for September,” Gagnon, a former Fed economist, said on Twitter.
Wall Street soared in early trading, with the benchmark Dow gaining nearly 500 points.
But the robust jobs market, which pushed the July unemployment rate to the pre-pandemic level of 3.5 percent, has a downside. There are still nearly two jobs open for every available worker, and labor costs have risen sharply, which pushes wages up and fuels more inflation.
Rubeela Farooqi of High-Frequency Economics cautioned that despite the slower pace of increases last month, “prices remain uncomfortably high.”
“Coupled with strength in job growth and wages, the data support the case for another aggressive rate hike in September,” she said in an analysis.
© Agence France-Presse. All rights are reserved.
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Notes from APS Radio News
Below is the hyperlink of the unexpergated report that earlier today was released by the Department of Labor
CONSUMER P RICE I NDEX – J ULY 2022
The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in July on a seasonally
adjusted basis after rising 1.3 percent in June, the U.S. Bureau of Labor Statistics reported today. Over
the last 12 months, the all items index increased 8.5 percent before seasonal adjustment.
The gasoline index fell 7.7 percent in July and offset increases in the food and shelter indexes, resulting
in the all items index being unchanged over the month. The energy index fell 4.6 percent over the month
as the indexes for gasoline and natural gas declined, but the index for electricity increased. The food
index continued to rise, increasing 1.1 percent over the month as the food at home index rose 1.3
The index for all items less food and energy rose 0.3 percent in July, a smaller increase than in April,
May, or June. The indexes for shelter, medical care, motor vehicle insurance, household furnishings and
operations, new vehicles, and recreation were among those that increased over the month. There were
some indexes that declined in July, including those for airline fares, used cars and trucks,
communication, and apparel.
The all items index increased 8.5 percent for the 12 months ending July, a smaller figure than the 9.1-
percent increase for the period ending June. The all items less food and energy index rose 5.9 percent
over the last 12 months. The energy index increased 32.9 percent for the 12 months ending July, a
smaller increase than the 41.6-percent increase for the period ending June. The food index increased
10.9 percent over the last year, the largest 12-month increase since the period ending May 1979.
The food index increased 1.1 percent in July; this was the seventh consecutive monthly increase of 0.9
percent or more. The food at home index rose 1.3 percent in July as all six major grocery store food
group indexes increased. The index for nonalcoholic beverages rose the most, increasing 2.3 percent as
the index for coffee rose 3.5 percent. The index for other food at home rose 1.8 percent, as did the index
for cereals and bakery products. The index for dairy and related products increased 1.7 percent over the
month. The index for meats, poultry, fish, and eggs rose 0.5 percent in July after declining in June. The
index for fruits and vegetables also increased 0.5 percent over the month.
The food away from home index rose 0.7 percent in July after rising 0.9 percent in June. The index for
limited service meals increased 0.8 percent and the index for full service meals increased 0.6 percent
over the month.
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The food at home index rose 13.1 percent over the last 12 months, the largest 12-month increase since
the period ending March 1979. The index for other food at home rose 15.8 percent and the index for
cereals and bakery products increased 15.0 percent over the year. The remaining major grocery store
food groups posted increases ranging from 9.3 percent (fruits and vegetables) to 14.9 percent (dairy and
The index for food away from home rose 7.6 percent over the last year. The index for full service meals
rose 8.9 percent over the last 12 months, and the index for limited service meals rose 7.2 percent over
the last year.
The energy index fell 4.6 percent in July after rising 7.5 percent in June. The gasoline index fell 7.7
percent over the month following an 11.2-percent increase in June. (Before seasonal adjustment,
gasoline prices fell 7.7 percent in July.) The index for natural gas declined in July after sharp recent
increases, falling 3.6 percent. However, the electricity index increased in July, rising 1.6 percent, its
third consecutive monthly increase of at least 1.3 percent.
The energy index rose 32.9 percent over the past 12 months. The gasoline index increased 44.0 percent
over the span and the fuel oil index rose 75.6 percent. The index for electricity rose 15.2 percent, the
largest 12-month increase since the period ending February 2006. The index for natural gas increased
30.5 percent over the last 12 months.
All items less food and energy
The index for all items less food and energy rose 0.3 percent in July after increasing 0.7 percent in June.
The shelter index continued to rise but did post a smaller increase than the prior month, increasing 0.5
percent in July compared to 0.6 percent in June. The rent index rose 0.7 percent in July and the owners’
equivalent rent index rose 0.6 percent. The index for lodging away from home continued to decline,
falling 2.7 percent in July after a 2.8-percent decrease in June.
The medical care index rose 0.4 percent in July after rising 0.7 percent in June as major medical care
component indexes continued to increase. The index for hospital services increased 0.5 percent over the
month, while the indexes for physicians’ services and for prescription drugs both increased 0.3 percent