Inflation in the US could have peaked. , corresponding to the month of July, reveals that the CPI stood at 8.5% year-on-year, six tenths below that of June (9.1%), and two tenths below what was forecast by the market consensus. Falling oil and fuel prices have helped moderate inflation that remains uncomfortably high.
Thus, everything indicates that inflation could already have left behind its highest level marked in June, when it stood at 9.1%. Now, all the focus is on the core (it does not weigh fresh food or energy), which could continue to rise for a few more months. Until the underlying indicator begins to decline, it cannot be said that the Federal Reserve has begun to gain a green pulse on inflation, according to experts.
But for now this information is a clear relief. Monthly inflation has remained at 0%, that is, prices have not moved from one month to the next, which is already a great advance. On the other hand, the monthly core CPI was 0.3%, compared to the 0.5% expected by the markets.
The price of gasoline fell 7.7% in July and offset the monthly increase in food and housing. The general energy index fell 4.6% during the month as the gasoline and natural gas indices contracted sharply, the Bureau of Labor Statistics noted. For its part, the food index continued its upward rate, increasing 1.1% during the month.
On the other hand, used vehicles have registered a monthly fall of 0.4% after two consecutive months of increases. Transport services have also corrected another 0.5% per month. (based on rate hikes and stimulus cuts) and expectations are beginning to work. Less vigorous demand (GDP and consumption are losing strength) is giving supply a breather and, therefore, prices. However, victory cannot yet be claimed as inflation remains at stubbornly high year-on-year levels.
Core inflation remains
The underlying CPI stood at 5.9%, the same level as in June and two tenths below what the market expected. This indicator marked its maximum in March, when it stood at 6.5%. However, in the coming months it could recover that level or even exceed it given the boom in rental prices and some services, although the July reading was below expectations. Orla Garvey, a manager at Federated Hermes, believes core inflation “will peak a bit later, probably in September.”
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Deutsche Bank analysts explained in a note prior to the data that “the market will be excited by a underlying CPI downside surprise, especially in risky assets. A downside surprise raises ‘hopes’ that the peak of Commodity (oil/food) inflation has arrived, in addition to anticipating slower demand, which will quickly filter into the inflation data.”
Conversely, “a bullish core CPI surprise would have fit the pattern of the last three releases, which have surprised to the upside. Strong inflation data after very strong July jobs data would have jeopardized the recent message from the Fed that the market is underestimating the neutral rate and overestimating
Commerzbank analysts see the data as positive, but prefer to be cautious: “Although we can breathe a little easier after today’s data, the inflation problem is likely to be very persistent. We expect US inflation to remain above 3% over the next year, despite the recession.
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