Wednesday’s report is expected to show price gains slowed in July as lower gasoline prices and air fares provided a welcome reprieve for consumers and policymakers.
However, it is not clear whether the easing will continue as fuel prices are unpredictable and gas prices could rise again. but may not have eased enough, and the Federal Reserve may need to continue to work aggressively to bring it down, he warns.
Consumer prices probably rose 8.7% in the year to July, down from 9.1% in the year to June, according to a Bloomberg survey of economists. The Federal Reserve aims to keep inflation at 2% on an annual basis, but has a related but different inflation target.
Policy makers have been hoping for more than a year that inflation will start to slow, but hopes have been repeatedly disappointed. Service prices have risen and housing shortages have pushed rents higher.
There are now signs of progress in at least two of these areas, with some easing of supply chain tensions and lower gas prices. Aneta Markowska, chief financial economist at Jefferies, said the still-rapid rise in wages and higher housing costs could keep inflation too high for comfort for some time.
“This is going to be a fairly moderate report, at least compared to the last few,” Markowska said, adding that price gains will continue to slow to about 4% by early next year, but then level off. “At the end of the day, we’re going to be left behind by housing and labor market pressures, and they won’t go away by themselves.”
The Federal Reserve (Fed) has agreed that inflation won’t naturally fade and has been raising interest rates since March in an attempt to borrow higher and cool the economy. . The goal is to weaken overall demand and allow supply to catch up.
But the consequences of the Fed’s actions will take time to emerge. Hiring unexpectedly accelerated in July, with the unemployment rate returning to a half-century low. Wages are still rising rapidly and consumer spending has not slowed as quickly as many economists expected.
various measures at the same time inflation expectations It suggests that lower gas prices and the Fed’s efforts to combat inflation may be calming consumers and investors.
The Federal Reserve is considering how quickly it should raise rates. June and he were up three-quarters in both July, suggesting he of that magnitude has three consecutive moves (unusually large) left. Possible at the September meeting.
