U.S. Core Inflation Cools for Fourth Straight Month
Core inflation in the United States has cooled for the fourth consecutive month in July, providing grounds for the Federal Reserve to consider lowering interest rates as early as the monetary committee meeting in mid-September. The core Consumer Price Index (CPI), which excludes food and energy costs, increased by 3.2% year-on-year last month—marking the slowest growth since the beginning of 2021. The monthly rise was 0.2%, slightly higher than the surprising monthly decline of 0.1% in June, according to data released by the U.S. Department of Labor on August 14.
Economists regard this index as a better inflation indicator compared to the overall CPI, which also rose by 0.2% from its June level and by 2.9% year-on-year. The statistical agency of the Department of Labor explains that nearly 90% of the monthly increase in the index is attributed to housing and rental costs, which surged at a faster pace in June. The inflation trend continues to be downward, as the national economy gradually shifts to a slower growth rate. Coupled with a softening labor market, this trend is likely to prompt American central bankers to begin reducing interest rates in September, with the number of cuts depending on upcoming fundamental indicators.
Before their September meeting, monetary strategists will receive additional information and another crucial report on the labor market—employment and unemployment—whose disappointing July data contributed to turbulence in global stock markets. Federal Reserve Chair Jerome Powell and his colleagues assure that they are now placing greater emphasis on this aspect of their dual mandate rather than on inflation, a stance likely to be reaffirmed at their annual symposium in Jackson Hole next week.
The inflation figures had little impact on U.S. stock index prices, while they did not significantly affect the value of the dollar, which had weakened in anticipation of the inflation news. At 5:16 PM Bulgarian time on August 14, one euro was trading at 1.1030 U.S. dollars. Traders are now betting on a lower likelihood of a 50 basis point rate cut next month.
Another report, also from August 14, which combines inflation figures with recent data on wages, indicates that the growth of real incomes cooled in July on a year-over-year basis.
