An inflation gauge closely tracked by the Federal Reserve remained low last month, adding to signs of cooling price increases and raising the likelihood that the Fed will leave interest rates unchanged when it next meets in late September, according to the Associated Press.
Today’s report from the Commerce Department showed that prices rose just 0.2% from June to July, the third straight modest increase. Compared with a year earlier, prices rose 3.3% in July, up from a 3% annual increase in June. The year-over-year figure, though, is down sharply from the 7% peak it reached a year ago but still above the Fed’s 2% inflation target.
Excluding volatile food and energy prices, “core” inflation ticked up just 0.2% from June to July, the same as from May to June. Compared with a year earlier, core prices rose 4.2%, up slightly from 4.1% the previous month. The year-over-year core figures rose partly because of much smaller price increases a year ago. The Fed’s policymakers closely monitor core prices as a telltale signal of where inflation might be headed.
The inflation gauge that was issued today, called the personal consumption expenditures price index, is separate from the better-known consumer price index. Earlier this month, the government reported that the CPI rose 3.2% in July from a year earlier, down from a peak of 9.1% in June 2022.
Fed Chair Jerome Powell underscored the tricky dynamics surrounding the economy and inflation in a high-profile speech last week at an annual conference of central bankers in Jackson Hole, Wyoming. He stressed that the Fed would “proceed carefully” as it considers its next moves.
Spending in July jumped around the July 4 holiday, according to data from the Bank of America Institute, which tracks consumer activity through its credit and debit cards, and a pickup in online spending occurred in mid-month, likely because of Amazon’s “Prime” shopping day. Later in the month, entertainment spending surged, probably reflecting the popularity of the Barbie and Oppenheimer movie releases. Those trends likely pulled some spending away from major retailers, some of which reported sharp sales declines in the spring and early summer.
