U.S. inflation up on rising gas and housing costs

14 Aug 2019

U.S. inflation increased in July as the cost of fuel and housing jumped.

The hike in inflation now slightly raises the possibility the Federal Reserve will hold back from rate cuts at their next meeting.
 
The U.S. consumer price index (CPI) picked up to 1.8% from 1.6% in June.

Month on month price inflation, excluding the turbulent energy and food sectors, jumped 0.3% in July after the same rise the previous month. It was widely predicted that there would be a 0.2% increase.
 
In terms of wages, real average hourly earnings, when adjusted for inflation and hours worked, dropped 0.1% for the month while real average weekly earnings were off 0.3%. On a year-over-year basis, the respective gains were 1.3% and 0.8%.
 
Not all experts are convinced prices will remain low if the U.S. remains clear of a recession, but the threat for now appears to be low.
 
“Inflation is low enough to give the Fed more leeway to cut interest rates in 2019 if the central bank grows more worried about the economy. Senior officials are watching closely to see if the expanding U.S. trade conflict with China hurts an already weak global economy and ultimately comes home to roost,” reports The Wall Street Journal.
 
“The bulk of the evidence ... indicates underlying inflation is pretty much right at the Fed’s target,” said Stephen Stanley, chief economist at Amherst Pierpont Securities.
 
Meanwhile, Andrew Hunter, senior U.S. economist at Capital Economics, said in a note: “Provided that the incoming activity data continue to deteriorate, however, the Fed still looks likely to cut interest rates again next month.”

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