Inflation slowed down more than expected in July. Prices were the same as they were in June. However, when compared to a year ago, inflation was still high at 8.5% on an annual basis. In June, annual inflation was 9.1%.
Why it matters: The slowing of inflation last month is welcome news. It was driven mostly by gas prices coming down. But we are far from out of the woods. The Fed’s target is 2%, and we won’t see that level for years.
Be smart: While the overall level of inflation cooled, consumers still saw the prices of necessities rise more than the topline figure, most notably food and electricity
- Food – up 1.1% monthly and 10.9% annually. The largest annual increase since May 1979.
- Gas – down 7.7% monthly but up 44% annually.
- Electricity – up 1.6% monthly and 15.2% annually.
- Housing – Up 0.5% monthly and 5.7% annually.
Bottom line: Some are suggesting we’ve hit “peak inflation,” meaning it will come down now going forward. It is too soon to say that. The enormous run-up in home prices over the last few years still hasn’t fully translated into the inflation data. It will put upward pressure on inflation for months to come. And inflation is hard to predict. Regardless, inflation will remain elevated, and the Fed will continue raising interest rates to quell it for the foreseeable future.
Dig deeper:
- Access this Chamber slide deck [PDF and PowerPoint] with up-to-date economic data and charts.
—Curtis Dubay, Chief Economist, U.S. Chamber of Commerce
