Prices in the US stayed the same last month. That's a cause for celebration: it's the first time they haven't gone up since November 2020.
It could also mean that the Fed's efforts to curb inflation are finally working and that a soft landing, where inflation is limited without toppling the economy into recession, is feasible.
I'll give you a minute to put on your party hats.
Now take them off because it's time for the bad news. And there's quite a bit of it.
First off, the only reason prices didn't rise overall is because of the falling cost of energy. Everything else went up.
The cost of gas in the US has fallen for nearly two months straight and is down by about 67 cents in the last month alone. Oil has come down to around $90 a barrel after spiking above $120 a barrel in June.
See here: The average price of a gallon of regular gas fell below $4 on Thursday for the first time since March.
We're all happy to get a break at the pump.
But inflation excluding food and energy prices is still very, very high compared to a year ago. Randall Kroszner, former governor at the Federal Reserve, told CNN that while inflation has likely peaked, it will take at least a year before inflation returns to the 2% level targeted by the Fed.
"Core inflation is still very disturbing for the Fed, dramatically above where the Fed wants it to be," said Kroszner, now a professor at the University of Chicago Booth School of Business. "It's too early to give the victory signal because you really have to see core inflation come down. This is one report."
Meanwhile, there's no guarantee energy prices will keep declining.
The Federal Reserve, the central bank tasked with taming inflation in the United States, will be the first to admit that it has little control over energy costs. The ongoing war in Ukraine has made prices particularly sensitive to disruptions. Hurricane season is also about to begin, which could drive prices higher.
And we're not getting breaks elsewhere either.
Food prices rose by another 1.1% last month and electricity costs were 1.6% higher, not great for those trying to make it through this seemingly never-ending heatwave. Housing prices were also on the rise, in spite of recent data that shows home sales are cooling.
So while stocks shot up on the headline news -- that the consumer price index rose at a slower pace from a year ago, coming in under analysts' expectations -- things aren't quite as promising when we take a peek under the hood.
Producer price data for July due later Thursday will be watched closely for further clues.
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