A sign on the drive-thru menu of a Wendy’s restaurant in Miami, Florida, on May 6, 2020, reads “Please be patient: Our supply chain is currently experiencing disruptions that may impact the availability of certain products.” .
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Inflation rose as expected in July, driven by rising housing-related costs, according to a report Wednesday from the Labor Department that could lead to further interest rate cuts in September.
The consumer price index, a broad measure of the price of goods and services, rose 0.2% for the month, bringing the 12-month inflation rate to 2.9%. Economists surveyed by Dow Jones had been looking for readings of 0.2% and 3% respectively.
Excluding food and energy, core CPI rose by 0.2% on month and 3.2% on an annual basis, in line with expectations.
The annual rate was the lowest since March 2021, while the core rate was the lowest since April 2021, the Bureau of Labor Statistics reported. The overall inflation rate in June was 3%.
A 0.4% increase in housing costs was responsible for a 90% increase in inflation across all items. Food prices rose 0.2%, while energy prices were flat.
Stock futures fell modestly after the report, while bond yields were mostly higher.
Although food inflation was subdued during the month, several categories posted significant gains, most notably eggs, which rose 5.5%. Cereals and baked goods fell 0.5%, while dairy and related products fell 0.2%.
Inflation data has gradually returned to the central bank’s 2% target. A report released by the U.S. Department of Labor on Tuesday showed that producer prices, which represent wholesale inflation, rose only 0.1% in July, up 2.2% from the same period last year.
Fed officials have signaled a willingness to ease policy, but they have been careful not to commit to a specific timetable or speculate on the pace of rate cuts that might occur. Current futures market pricing indicates that the price reduction will be approximately 25 percentage points or 0.5 percentage points at the September 17-18 meeting, and at least 1 percentage point by the end of 2024.
As inflation eases, concerns about a labor market slowdown appear to be raising the possibility that the Federal Reserve will begin cutting interest rates for the first time since the early days of the COVID-19 crisis.
“While it’s down, there’s still stickiness in sticky areas,” Liz Ann Sanders, chief investment strategist at Charles Schwab, said in describing the CPI report. “We have to keep a close eye on the inflation data and the jobs data.”
There are some counterarguments in the report, which does show that inflation is stubborn in some areas.
This is breaking news. Please check back for updates.
