Inflation in July falls below 3% for first time since March 2021

SIMONE DEL ROSARIO | BUSINESS CORRESPONDENT

We are minutes away from the Consumer Price Index, releasing the latest numbers for July. This one is going to be incredibly critical given we are making every single measurement about what is the Federal Reserve going to do next? Of course, we are coming off of the heels of a pretty disappointing jobs report, and even calls out there for the Fed to do an emergency rate cut, given the rise in unemployment. This inflation number today is going to help advise us a little bit more as to what we’re looking at. And I am joined by the EconoQueen herself, Kathleen Hays. She is the editor-in-chief of Central Bank Central.

Okay, Kathleen, the numbers came in. So I’m going to go ahead and look down at my laptop here read for a little bit. We’ve got an expected climb for the month, 0.2%, just as expected. You said that the Fed might have liked to see something even a little bit softer. But what is softer is that annual number at 2.9% inflation, year over year. We’re in the twos, Kathleen, I just want to let that sit in for a second. I know that last month was on the official level, like 2.97 rounds up to three, but this is a big moment to see that two in front of all of this. And then if I look at core, core did exactly what economists expected. It rose 0.2% on the month, and it is up 3.2% on the year. Yep, got to look over my spreadsheet right there, 3.2% on the year. Core, of course, is what strips out food and energy. Those are the more volatile indexes out there. So it’s looking more at the commodities and services that take all of that out of account. So it is a little bit higher. Do you have it in front of you, Kathleen, what are you seeing?

KATHLEEN HAYS | EDITOR-IN-CHIEF, CENTRAL BANK CENTRAL 

The CPI for all items, 0.2% in July and shelter costs were actually up. That’s a bit of a concern because people are waiting for implied rents from the mortgage you pay, etc, to soften up. This is going to, I think this is striking me so far as a report that is fine.

Certainly, if you’re a dove, this is a good enough report to say it’s going to continue to come down. Don’t worry, we can cut in September. Policy, if you look where the funds rate is, the key rate for the Fed, it’s still restrictive, and we’re making enough, even if it’s slow progress on inflation, to make that first cut in September.