US consumer prices were flat in July on a sharp drop in gasoline costs, providing the first notable sign of relief for weary Americans who have watched inflation rise over the past two years.
The consumer price index (CPI) was flat last month after rising 1.3 percent in June, the Labor Department said yesterday in a closely-watched report that could allow the Federal Reserve to taper the magnitude of September’s rate hikes.
The reading was the largest monthly slowdown in price increases since 1973 and follows a roughly 20 percent drop in gasoline costs.
Prices at the pump skyrocketed in the first half of this year due to the war in Ukraine, hitting a record high of more than $5 a gallon in mid-June, according to motorists’ advocacy group AAA.
Economists polled by Reuters had forecast a 0.2 percent rise in monthly CPI in July. Aside from next month’s monetary policy meeting, the Fed has indicated that it would take several monthly declines in CPI growth before it would back down from the aggressive policy tightening it has been conducting to tame inflation, which is currently at a four-decade high.
The lower-than-expected CPI data sparked a sharp rally in stock markets, with the S&P 500 index up 1.7 percent in early trade. Investors immediately reduced their bets that the Fed will make a third consecutive 75 basis point rate hike at its Sept. 20-21 meeting rather than see the US The central bank is likely to opt for a half-point hike.
“This is not yet the meaningful fall in inflation that the Fed is aiming for. But it’s a start and we expect broader signs of easing price pressures over the next few months,” said Paul Ashworth, chief US economist at Capital Economics.
US consumer prices have skyrocketed due to tangled global supply chains, major stimulus from the Covid government and the Russian invasion of Ukraine.
https://www.independent.ie/business/world/inflationary-pressures-ease-in-the-us-after-more-than-a-year-of-sharp-rises-as-petrol-prices-fall-41903873.html Inflationary pressures are easing in the US after more than a year of strong increases as gasoline prices fall