Annual inflation slowed for the second month in a row, cooling to 3.4% in July, according to the latest Consumer Price Index (CPI) data. The Consumer Price Index for July showed prices rose 0.1 percent in July from a month prior, in line with analysts’ expectations.
The United States is riding five consecutive years of high inflation since the peak of the COVID-19 pandemic. Additionally, inflation is just two months fresh off a report that saw it reach a three-year high. Hence, analysts aren’t too relieved after the latest report, as there is still a long way to go to reach pre-pandemic inflation numbers.
Indeed, monthly economic data can be quite volatile, and that’s especially been true in the past two years. Prices–particularly energy and gas prices – have been sporadic because of a months-long war in Iran. Those prices, as well as inflation, have eased in recent weeks as some peace talks appeared to progress. However, those negotiations remain quite choppy; plus, plenty of inflationary risks are in the pipeline as higher oil and fertilizer prices work their way through the economy in the coming months.
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Furthermore, the Federal Reserve is still keeping its cards close to its chest about the future of interest rates, and is tracking these inflation reports for a sign to cut or hike. Summarizing how little has changed after today’s inflation data, Eric Winograd, chief economist at AllianceBernstein, a fund manager, says that “the numbers don’t push the Fed closer to or farther away from a rate hike: that decision is still very much pending.” New Fed Chair Kevin Warsh has openly admitted that the Fed has mishandled rates and inflation in recent months, but hasn’t offered much clarity on a plan to battle the existing US inflation.