Has inflation peaked? Maybe, but the fall could be ‘painfully slow’

Colder-than-expected July inflation data fueled hopes that consumer prices peaked earlier this summer after a year of relentless increases that crushed Americans, created a political storm for President Biden and forced the Federal Reserve to raise interest rates at the fastest pace since contracts. .

The CPI rose 8.5% In July of the previous year, a larger decline of the 9.1% recorded in June than economists had expected. On a monthly basis, the index did not move at all as declines in the cost of oil, gasoline and airline tickets offset increases in food and rents.

Excluding more volatile measures for food and gasoline, prices jumped 5.9% in July, matching the previous month.

While the slowdown is likely Welcome to the Federal Reserve Recess As it tries to fight inflation under control, experts have warned that inflation remains painfully high and may be slow to return to pre-pandemic levels around 2%.

Bulging still wipes out average Americans’ wage earnings

“We are not out of the woods by far,” said Peter Earle, a research fellow at the American Institute for Economic Research, a nonprofit think tank. “There is a long way to go, and a lot could happen before we return to the 1.5%-2.5% annual inflation zone that Americans are accustomed to.”

Whether inflation really peaked is still highly uncertain, especially COVID-19 The Russian war in Ukraine continues to disrupt the global economy. Economists had previously predicted that the tide of inflation would peak, but they were proven wrong the following month.

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However, expectations are still that the pace of sharp price increases will slow in the coming months, although it could be a prolonged return to “normal”.

Detailing July inflation: Where do higher prices hit Americans the hardest?

Sima Shah, chief global strategist at Major global investors. “Families will unfortunately continue to feel extreme pressure from higher price pressures on their balance sheets, while continued wage growth will impact corporate profit margins.”

A customer shops at a supermarket in Millbra, California, August 10, 2022. (Li Jianguo/Xinhua via Getty Images/Getty Images)

Severe inflation has put severe financial stress on most American families, who are forced to pay more for daily necessities such as food and rent. The burden is disproportionately borne by low-income Americans whose already burdensome salaries have been affected by price fluctuations.

despite American workers We’ve seen strong wage gains in recent months, which have been largely eroded by inflation. Average real hourly earnings fell 0.5% in July from the previous month when accounting for higher consumer prices, according to the Labor Department. On an annual basis, real earnings fell 3% in July.

“While strengthening the overall economic outlook is welcome, easing inflation will look hollow with many low-market consumers whose wages are declining in real terms despite Gasoline prices drop Joe Brusolas, chief economist at RSM, said:

Inflation in the United States

Blueberries and cherries for sale at a farmers market in the Fort Green neighborhood of Brooklyn, New York, July 16, 2022. (Alison Hess/Bloomberg via Getty Images/Getty Images)

Despite the monthly drop in energy prices in July, Americans are still paying significantly more for gasoline (32.9%) than they did one year ago. Households also face soaring food prices, which have risen 13.1% over the past year, the largest increase since 1979, and steep rents, which are up 6.3%.

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In fact, the average American shells out an extra $717 per month because Hottest inflation in decadesAccording to the analysis of the Joint Economic Committee of the Republicans.

“While prices were unchanged from June to July 2022, prices increased by 13.3% from January 2021 to July 2022, costing the average American family $717 in July 2022 alone,” the analysis said.

Even if prices stopped increasing altogether, the inflation that actually occurred between August 2021 and July 2022 would cost the average American household an additional $8,607.

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President Biden, He hailed the lower-than-expected report on Wednesday as evidence that inflation “may be beginning to moderate.” But Biden acknowledged that the fight against inflation may not be over yet.

“We may face additional headwinds in the coming months,” he said. “Our work is not over yet.”

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