On a monthly basis, inflation is actually zero, which means that prices, contrary to expectations, did not increase compared to June, while they had increased 1.3% in the previous month compared to May.
THE inflation scored higher than predicted slowdown in the United Statesdue to the drop in the price of gasoline at the pump, giving Joe Biden a ‘breather’ just months before a crucial election.
However, it remains at very high levels.
The Consumer Price Index (CPI) rose 8.5% in July on an annual basis, as the Ministry of Labor announced today, after a 9.1% increase in June that was record of the last 40 years.
Inflation was expected to reach 8.7% in July, according to MarketWatch.
On a monthly basis, inflation is actually zero, which means that prices, contrary to expectations, did not increase compared to June, while they had increased 1.3% in the previous month compared to May.
Inflation remains however at very high levels, which may push the US central bank (Fed) to raise interest rates again during its next session in September.
For a year and a half, prices have not stopped rising in the US, eroding the purchasing power of households. And, as a result, the popularity of the American president.
His opponents they accuse him of following an inflationary economic policy, mainly because of the generous recovery plan of March 2021, soon after he arrived in the White House.
The question now is whether there can be a sustained reduction in inflation without the world’s largest economy plunging into recession after two quarters of shrinking GDP.
The Fed is seeking to induce a voluntary slowdown in consumption in order to loosen the rope on prices.
It has therefore quadrupled its key interest rates, which are now between 2.25% and 2.50%. This increase leads commercial banks to offer their private customers and businesses loans with higher interest rates.
And as long as inflation remains high, the Fed will raise interest rates.
Another measure of inflation, PCE, which the Fed prefers over CPI, accelerated in June to 6.8% on a year-over-year basis.
Before the pandemic, inflation barely reached 2%, a rate considered healthy for the economy. But it was accelerated by the disruption of global supply chains and a labor shortage in the US, at a time when American households were rapidly increasing their consumption.
Added to this was the war in Ukraine, which caused petrol and food prices to skyrocket.
Especially since the US labor market remains very dynamic. And, in July, the unemployment rate fell back to 3.5%, the same as before the pandemic.
However, there remain nearly two job vacancies per available worker, pushing wages up and contributing to inflation.
RES-EMP
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