Action Investments Limited: What Experts Say About Inflation Based on the CPI Report

A glitch in year-over-year comparisons prompted headline inflation to jump for the first time in more than a year in July, but underlying data indicated that the rate of increasing prices continues to slow.
SHEUNG WAN, Hong Kong - Aug. 24, 2023 - PRLog -- According to analysts, the July inflation estimate, which was broadly in line with forecasts, strengthens the argument for the Federal Reserve to keep interest rates steady at the upcoming Fed meeting.

Headline CPI jumped 3.2% year on year in July, according to the Bureau of Labor Statistics on Thursday. This was higher than the 3% estimate in June, and it was the first price increase in 13 months. Comparisons to prior-year periods with more variable inflation rates led to July's rise. CPI climbed 0.2% month on month last month, the same pace as in June.

More crucially, the core CPI, which excludes volatile food and energy costs, increased for the first time in two years. The core CPI grew 0.2% in July after gaining 0.2% in June. The annual rise in core CPI was 4.7%, which was in line with experts' expectations.

Although inflation remains over the Fed's 2% objective, the July CPI numbers add to a growing body of evidence that the Fed is making success in combating the worst spell of inflation to strike the US economy in four decades.

The Federal Open Market Committee (FOMC), the central bank's rate-setting body, is largely anticipated to keep the short-term federal funds rate steady at a target range of 5.25% to 5.5% when it meets again in September. Interest rate dealers assigned a 91% chance of the Fed clicking the pause button next month as of August 10.

With the July CPI report already in the books, we asked economists, strategists, investment officers, and other professionals what the inflation data means for markets, macroeconomics, and monetary policy moving ahead. Please find a sample of their opinion below, which has been modified for brevity or clarity.

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