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

Published Aug 14 Updated Aug 14

Simone Del Rosario Business Correspondent

By Simone Del Rosario (Business Correspondent), Brent Jabbour (Senior Producer)

Consumer price inflation rose slightly in July, in line with expectations. July’s 2.9% annual rise came in a tick below the 3% expected, clearing the way for the Federal Reserve to wait until September to take action after the month’s troubling jobs report.

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The Bureau of Labor Statistics numbers out Wednesday morning, Aug. 14, rose 0.2% compared to June’s 0.1% monthly decline. July’s 2.9% annual rise is slightly down from June’s 3.0% pace.

Core inflation, which measures price increases without volatile food and energy, rose 3.2% year-over-year and 0.2% from June.

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The annual increase in headline CPI was the slowest increase since March 2021.

Shelter rose 0.4% from June, which the BLS said accounted for nearly 90% of the monthly increase in the all-items index.

The cost of used cars and trucks fell 10.9% compared to July of last year and down 2.3% from June. Energy prices were mostly stable month to month and up 1.1% for the year.

The price of groceries is up just 0.1% for the month and 1.1% compared to July of last year.

Central bankers will meet for the Jackson Hole Symposium set for Aug. 22-24. While policy won’t be changed at the meeting, analysts will be looking for signals on whether the Fed will cut rates by 25 basis points or 50 basis points in September, if at all.

Tags: Economy, Federal Reserve, Inflation, Labor, U.S. Economy

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.