The prices consumers pay for a variety of goods and services rose 8.5% in July from a year ago, a pace that is slowing from the previous month largely due to a decline gasoline prices.
Month over month, prices remained stable, with energy prices down 4.6% overall and gasoline prices down 7.7%. This offset a 1.1% monthly increase in food prices and a 0.5% increase in housing costs.
Economists polled by Dow Jones expected the headline CPI to rise 8.7% on an annual basis and 0.2% per month.
Excluding volatile food and energy prices, the so-called core CPI rose 5.9% per year and 0.3% per month, against estimates of 6.1% and 0.5% respectively. %.
Even with figures below expectations, inflationary pressures remained strong.
The jump in the food index took the 12-month increase to 10.9%, the fastest pace since May 1979. Even with the monthly decline in the energy index, food prices electricity increased by 1.6% and 15.2% compared to a year ago. The energy index was up 32.9% from a year ago.
Used vehicle prices posted a monthly decline of 0.4%, while clothing prices also fell, falling 0.1%, and transportation services fell 0.5%, fares airlines fell 1.8% for the month and 7.8% from a year ago.
Markets reacted positively to the report, with Dow Jones Industrial Average futures up more than 400 points and government bond yields down sharply.
Shelter costs, which account for about a third of the CPI’s weighting, continued to rise and were up 5.7% from a year ago.
People shop at a grocery store on June 10, 2022 in New York City.
Spencer Platt | Getty Images
The figures indicate that inflationary pressures are easing somewhat but remain close to their highest levels since the early 1980s.
Clogged supply chains, outsized demand for goods relative to services, and trillions of dollars in pandemic-related fiscal and monetary stimulus have combined to create an environment of high prices and slow economic growth that has plagued policy makers.
Lower gasoline prices in July offered some hope after pump prices topped $5 a gallon. But gasoline was still up 44% from a year ago and fuel oil was up 75.6% on an annual basis, despite falling 11% in July.
Federal Reserve officials are using a recipe for interest rate hikes and monetary policy tightening in hopes of pulling inflation numbers well past their long-term target of 2%. The central bank has raised benchmark borrowing rates by 2.25 percentage points so far in 2022, and officials have provided strong indications that more increases are to come.
There was some good news earlier this week when a New York Fed poll indicated consumers lowered inflation expectations for the future. But for now, the soaring cost of living remains a problem.
As inflation accelerated, gross domestic product declined in the first two quarters of 2022. The combination of slow growth and rising prices is associated with stagflation, while the two quarters streaks of negative GDP meet a widely held definition of a recession.
Wednesday’s inflation figures could relieve the Fed.
Recent comments from policymakers pointed to a third consecutive interest rate hike of 0.75 percentage points at the September meeting. Following the CPI report, market prices reversed with traders now pricing in a better chance of a 0.5 percentage point lower move.
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