Inflation has been one of the major issues existing in America in the recent past. As per the latest inflation data release today, the 8.5 percent increase in July’s Consumer Price Index is going pretty good and it is quite the news for consumers and policymakers.
This can be said to be a slower annual increase when you compare it to the data of June. After the inflation moderated in July, the prices of the stocks went up. As a matter of fact, the S&P 500 index increased by 2.1 percent which led to recovering all the declines that have been recorded during the past four sessions. So, the benchmark stocks index of July is currently the highest post the May sessions. But how will it impact the economy? You can find it out right away.
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Prices of Petrol And Other Commodities Are Expected To Reduce
The first thing that relieved the customers is that the inflationary pressures are going to be eased and there are chances to have lower petrol prices. The rapid reduction in the prices in the world’s largest economy that was suffering from severe inflation is something that made Wednesday a day to be remembered. Not only the Biden administration but also the Federal Reserve is now feeling at ease post the CPI data release.
New figures were out and reflected no increase in the stated CPI as tracked between June and July. Interestingly, even a month ago, there was a 1.3 percent monthly rise and in June, the CPI growth came back from a huge 9.1 percent increase in June.
Moreover, experts are finding hope in the situation. “Both figures were improvements over economists’ expectations of a 0.2 percent increase in the CPI on a monthly basis and an 8.7 percent rise annually.”
But this doesn’t end the misery. Inflation is still nearing the mark of 40 years high and becoming one of the most historic inflation to date. The Fed might loosen up a bit now as over the past few months, they have practiced aggressive tightening of all sorts of monetary policies to overcome inflation. In fact, the Fed Chair, Jay Powell claimed previously how the US Central bank had gathered pieces of evidence that proved that inflation is going to move downwards by the 2 percent target.
Besides, “the core measure of CPI — which strips away more volatile food and energy prices and is most closely watched by the Fed — also recorded an unexpectedly small monthly increase of 0.3 percent compared with 0.7 percent in June. But on an annual basis, it rose at an unchanged pace of 5.9 percent.”
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In What Other Ways Will The Deceleration In Inflation Impact? Has Recession Been Avoided?
To assess the situation a bit more, an expected “sustained deceleration in inflation” will actually result in the central bank taking further measures by not continuing to raise interest rates. This might result in a “soft landing” that can be useful to prevent the occurrence of recession. While analyzing this week, New York Fed claimed that the consumer survey highlighted the decline in inflation expectations which is definitely going to further impact the policy decision-making process,
The Chief US economist at Capital Economics, Paul Ashworth said, “With headline inflation still at 8.5 percent and core inflation at 5.9 percent, this is not yet the meaningful decline in inflation the Fed is looking for. But it’s a start and we expect to see broader signs of easing price pressures over the next few months.”
Even the traders are encouraged to experience a more profitable year ahead. Besides, even the central bank is anticipated to remove its 3.4 percent by the end of the year. However, there is still a problem. The food prices along with the shelter prices are increasing over the months affecting the finances of many households. The government has taken medium as well as long-term measures to curb inflation. Furthermore, there have been talks regarding negotiating the price of prescription drugs.
So, with inflation coming at a steady pace and the prices of certain commodities and resources going down, things are expected to get normal soon enough.
Stay tuned for more updates, Lee Daily.