**Heading: Fresh Inflation Data Points to Cooling Price Increases**
New inflation data recently released provides further evidence for economists and policymakers that the price increases are significantly cooling down. This development comes as welcome news, over a year into the Federal Reserve’s initiative to moderate the economy and bring the escalating costs back under control.
**Heading: Consumer Price Index Observes First Acceleration in Over a Year**
According to the report released on Thursday, the Consumer Price Index saw an increase of 3.2% in the year leading up to July, marking the first acceleration in 13 months. This follows a 3% reading in June. However, it’s important to consider the context behind these figures. Inflation was swift in June of last year and decelerated slightly the following month. Hence, when the figures for this year were compared to the 2022 readings, June appeared lower and July seemed higher than if the prior year’s figures had been steadier.
**Heading: Economists Focus on Core Inflation Index**
Economists are more interested in another figure: the ‘core’ inflation index, which excludes the volatile food and fuel prices. This index rose by 4.7% over the past year, a decrease from 4.8% in June. On a monthly basis, core inflation climbed by just 0.2%, mirroring the previous month’s encouragingly low figure.
**Heading: Inflation Continues to Cool, Offering Positive Signs for the Future**
The report concluded that inflation continues to cool down, and the details from July offer promising signs for the future. Rent prices have been moderating, a trend that is expected to continue in the coming months and should help to suppress inflation overall. An index tracking service prices outside of housing is also rising slowly.
**Heading: Federal Reserve Reviews Fresh Inflation Figures**
The fresh inflation figures are likely to come under the spotlight at the Federal Reserve, where officials are considering whether inflation has slowed enough to halt the increase in interest rates. They have raised the benchmark rate to a range of 5.25 to 5.5%, up from near zero in March of the previous year. This move makes it more expensive to borrow for buying a house or affording a car. As the Fed’s actions permeate through the economy, they decelerate it and reduce the extent to which companies can increase prices.
**Heading: Officials Debate Over Further Rate Increase**
Officials are deliberating whether they need to increase rates again this year to ensure that the economy slows down sufficiently to guarantee that inflation fully normalizes. The fresh figures are likely to make it easier for officials who wish to delay a rate increase to make their case at the Fed’s next meeting, scheduled for Sept. 20. However, the July inflation report might pose a challenge for the Biden administration due to the acceleration in the headline number, despite the largely positive news for the Fed.
**Heading: Gas Prices Surge, Inflation Gauge Could Remain High**
Towards the end of July, gas prices began to rise. Although this increase came too late to significantly affect that month’s report, it has persisted into August and will likely boost inflation in the next set of figures, due before the Fed’s next decision on interest rates. Despite this, the impact of higher fuel costs is expected to be rather modest. Altogether, there’s nothing to suggest the need for the Fed to proceed with further interest rate hikes this year.
Original Story at www.nytimes.com – 2023-08-10 17:34:16
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