CPI Bell Dings, Inflation Fight 2 Go Distance?

Despite plunging gas prices, US inflation eased only slightly in July from 9.1% to 8.5%. Core CPI, that excludes energy & food costs, rose slightly as sign broad price pressure remain…So, War on “I” becoming 1 of attrition?

First, what exactly are those “pressures” likely to contribute to an ongoing effort to ease inflation, the worst in 4 decades? (BTW: The Fed’s inflation goal is “2%”.) As WSJ noted they include: Slowing economic growth as the economy has shrunk two quarters in a row. Cost of doing business, e.g., because of rising wages because of post-pandemic labor shortages. Food and dining out. Government stimulus (think the latest $839 billion “Anti-Inflation Act”). Housing (sales and rentals). Interest rates as the Federal Reserve is expected in its September meeting to increase the interest it charges banks by another 75 base points. “Even if headline inflation slows on account of weaker energy prices but core inflation is stubbornly high, the Fed is likely to maintain its tightening bias as it will be concerned about high inflation being entrenched in consumer price expectations,” T. Rowe Price’s Blerinda Uruci told WSJ.

Not that all the news was bad as some costs DID “moderate.” Yet, we STILL seem to be in that aggravating “in between”, trying to read the inflation tea leaves, all the more important because the very effort to tame it usually leads to recession. The WH, Congress and Fed arguably teamed up to create the problem, in part, by overspending, then, being slow to counter it. And, the real question may be whether whatever “solutions” they are finally using to address it are making things better or worse? Round 3 coming up in September … Ding.

Davd Soul