July's CPI inflation report shows headline inflation increased from 3.0% to 3.2%, while core inflation fell from 4.8% to 4.7%. Food inflation is at 4.9%. Energy prices are down 12.5%.
CPI inflation report for July: headline inflation increased to 3.2% and core inflation fell to 4.7%.
Core inflation remains sticky in the 4-5% range.
The Federal Reserve prefers to use core inflation as their gauge, and 4.7% is above their target of 2%.
Food inflation up 4.9 percent, energy down 12.5 percent
Food inflation is at 4.9 percent, an improvement from 5.7 percent in the previous month.
Year-over-year stats on common food items: egg prices down 13.7 percent, milk down 3 percent, butter down 1.1 percent, fish down 0.9 percent, coffee up 1 percent, meats up 1.9 percent, fruits and veggies up 2.9 percent, bread up 9.5 percent.
Energy prices down 12.5 percent compared to last year but up from 16.7 percent decrease last month.
Gasoline prices are increasing due to the rise in oil prices. - Fall in energy prices is helping out headline inflation significantly.
Energy prices are down, but electricity prices are up.
Shelter inflation dropped from 7.8% to 7.7%.
Shelter inflation is slow to rise and fall due to pre-existing contracts.
Services inflation is up 6.1% year over year, above the 2% target.
Shelter inflation will remain the same next month.
Services inflation is important for the Federal Reserve and the labour market.
Market believes current interest rates are sufficient to bring down inflation.
Odds of Federal Reserve not raising interest rates increased to 90%.
There is still time before the next FOMC meeting to monitor inflation and jobs reports.
Inflation is on the rise again, causing concern for the Federal Reserve
The initial decrease in inflation was followed by a surge due to loose monetary policy
Core inflation remains high at 4.7%, well above the 2% target
Inflation pressures remain high and it will take time to bring them down to the target of two percent.
Historical records show that it takes about two years on average to reduce inflation from its peak to the target.
The Federal Reserve is likely to stop raising interest rates soon, but there will be a pause for a few months around the two-year mark.
The economy will suffer in a higher interest rate environment until inflation is brought down.
The Federal Reserve is not expected to cut interest rates or change its policy in 2023.
The Federal Reserve is expected to cut interest rates and pivot in 2024.
The interest rate cuts are likely to happen in increments of 0.25.
There is uncertainty about the quantitative easing and money printing side of things in 2024.