Bad news: inflation is still too high, with consumer prices rising by 8.5% more last July, and is well above the 2% that government politicians consider healthy. Americans still feel the sticker shock in their daily lives.
While the fuel costs, especially gas prices, have eased in recent months, the heart the rate of inflation that removes these more volatile items such as energy and food has increased 5.9% year over year, matching the June increase.
“When you look at where we are and put that into perspective, you can see that when you compare it to January 2020, it looks like we’re easing up,” CNN’s Rahel Solomon said during an interview. appearance on “Newsroom”.
Solomon said a single report like Wednesday’s might not affect the Federal Reserve’s aggressive anti-inflation plan to raise interest rates. It is a pattern of these types of reports, spread over several months, that decision makers are looking for.
Gasoline prices are falling, but…
Gasoline prices fell 7.7% from June to July, but are still up 44% from a year ago. In the real world, that means gasoline prices rose from a record average of over $5 a gallon in early June to a national average of a penny above $4 on Wednesday, according to AAA.
It is this short-term decline in fuel costs that has offset increases in other areas, such as food, housing and electricity.
“You have to look very carefully at food and rent, because those are things you can’t reduce,” CNN global economic analyst Rana Foroohar said, appearing on “Newsroom.”
“A lot of things that people can cut back on — taking vacations, buying a new car, buying certain home products — they cut back on those things, and I think that’s one of the reasons you’re seeing demand drops and inflation drops But in the things that you can’t reduce — where you live, what you eat… those are things that concern me.
Food prices are rising, affecting everyone
While headline inflation has held steady over the past month, food prices have not come down.
CNN’s Vanessa Yurkevich visited a Philadelphia grocery store to talk to shoppers about the costs. She found Ken Elder, a retiree wearing a well-worn Grateful Dead T-shirt living on Social Security who’s changed his day-to-day shopping habits since prices rose. “Especially in meats, dairy products,” he said.
Appearing after Yurkevich and Elder on CNN, White House official Gene Sperling said lower gas prices were a start and could save Americans money.
“No one here is suggesting things are good enough,” he told CNN’s Ana Cabrera. “Prices are still too high and they’re still hitting too, you know, families at the grocery store. It’s better at the gas pump than it used to be.”
Gas prices could go up at any time, depending on what happens both with Russia’s war in Ukraine and with OPEC, the cartel that determines oil prices.
Housing is a bigger issue
Housing, the largest expense in most households, is a determining factor. This is an outsized element in this core inflation figure which remains high.
Ahead of the release of the CPI report, CNN’s Martha White looked at housing and noted that the Fed’s efforts to fight inflation – by raising interest rates – were making housing even more expensive. buying a house.
Key line: Companies are hiring, but production is falling. Consumers are pessimistic about what to expect, but they continue to spend. The economy has zagged when it was supposed to zag, and even professionals are looking for answers.
Don’t party. There’s more turbulence ahead
Larry Summers – former Treasury Secretary to Bill Clinton and economic adviser to Barack Obama – has played the flyweight role of President Joe Biden and the current Federal Reserve, criticizing government spending and the failure to raise interest rates earlier.
He pointed out that many economy watchers were hyped after a strong CPI report in March, only to be hammered by the massive inflation reported through June.
“I think we just have to maintain a sense of uncertainty and wait for the data as it comes,” Summers said. said on MSNBC. “I still think we have a very serious inflation problem in this country. I don’t think the inflation problem is going to go away on its own. And so, I think we’re probably going to have some pretty turbulent times ahead. . “
Things might not look cheaper yet or soon
This will be confusing to Americans, who probably don’t read CPI reports, but look at the cost of chicken thighs and shake their heads.
“What you think about the economy as an individual is sometimes just as important as all the statistics in the world…and I know a lot of people are saying, ‘We still feel like prices are pretty high in grocery stores and pumps,” Foroohar said.
But for economists, a report like Wednesday’s suggests the Federal Reserve could actually land a success with interest rate hikes and slow inflation without plunging the economy into recession, what they call a “soft landing”.
What’s not yet clear is whether it’s the Fed’s actions – large, successive rate hikes – or sticker shock among Americans over high energy and food costs that are slowing the economy. ‘inflation.
The Fed will review not only the CPI report, but also the jobs numbers released last week which showed much better-than-expected job and wage growth – things that could theoretically prolong inflation – when policymakers meet to consider further rate hikes. in September. On Wall Street, traders were already changing their expectations for the magnitude of further rate hikes.
And, really, after these last few years, who knows what might happen.