Continued Cooling – The July Inflation Report
Investors have had their eyes on the July inflation report for a while now given its significance. The Federal Reserve has kept their eyes on the labor market for a while now as a factor in raising interest rates, and we’ve finally started to see it cool down. Additionally, inflation has continued to persist in the US economy, sitting well above the 2 percent rate that the Fed is trying to achieve. Rising rates are continuing to be a burden on businesses as we discussed yesterday with offshore wind farms, making the wrong decision a disastrous one.
Fortunately, it seems as if there is hope that rate increases will finally stop. The consumer price index rose by 0.2 percent in July, which matched the month of June, signaling a slowdown in inflation. However, the key figure here is core inflation, which we all know is one of the most important metrics because it eliminates volatile items like food and gas. Core inflation now sits at a rate of 3.1 percent, the lowest it’s been in two years, showing that great progress has been made on this front. One of the biggest core inflation culprits back in the day was used car prices, which fell by 1.3 percent in July, contributing to the encouraging numbers we are seeing.
These inflation figures are signaling the possibility of a “soft landing” for the US economy, where inflation will decrease and unemployment stays low, allowing for economic growth to continue moving forward. The Fed is now expected to pause interest rate hikes moving forward, but analysts are warning not to get too far ahead of ourselves as inflation numbers haven’t consistently fallen yet.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
