Home United States USA — mix EXPLAINER: Mixed US inflation signs. Where are prices going?

EXPLAINER: Mixed US inflation signs. Where are prices going?

65
0
SHARE

Consumers struggling with skyrocketing prices for food, gas, autos and rent got a tantalizing hint of relief last month, when prices didn’t budge at all from June after 25 straight months of increases. With gas prices continuing to fall, inflation is probably slowing further this month.
Consumers struggling with skyrocketing prices for food, gas, autos and rent got a tantalizing hint of relief last month, when prices didn’t budge at all from June after 25 straight months of increases. With gas prices continuing to fall, inflation is probably slowing further this month.
So has the worst bout of inflation in four decades possibly peaked? Economists say it’s too soon to know for sure. Even if inflation has peaked, it will likely remain high well into next year.
Since inflation ignited early last year, it has temporarily slowed before, only to re-accelerate in later months. When that happened last fall, Federal Reserve Chair Jerome Powell was forced to jettison his description of higher prices as being merely “transitory” and to acknowledge that high inflation was proving to be chronic.
Even if some prices should keep declining, others — housing costs, for example — are almost sure to remain painfully high. And that means there’s likely still a long way to go before inflation will get anywhere close to the 2% annual pace that the Fed has targeted and that Americans were long accustomed to.
On Wednesday, the government reported that consumer inflation jumped 8.5% in July from 12 months earlier. That was an unexpectedly sharp slowdown from the 9.1% year-over-year inflation rate in June, which was the largest in four decades. But it was still quite high.
So-called core prices, which exclude the volatile food and energy categories to produce a better picture of underlying inflation, also rose more slowly: They increased 0.3% from June to July, less than the 0.7% rise from May to June. Over the past 12 months, core prices rose 5.9%, the same as in June.
Here are some questions and answers about inflation:
____
WHERE IS INFLATION HEADED?
That’s hard to say, because there are multiple signs pointing in both directions.
In addition to the ongoing decline in gas prices, the cost of groceries — a huge driver of inflation for the past year — could soon rise much more slowly. Futures prices for dairy, chicken and eggs have been falling in recent weeks, according to Capital Economics, a forecasting firm. And costs for such farm commodities as wheat, corn and soybeans are also well off their springtime peaks.

Continue reading...