Inflation Eases to 8.5% Year Over Year in July, Remains Near 40-year High
The Bureau of Labor Statistics announced that the U.S. consumer price index (CPI) rose 8.5% year over year in July 2022, a slightly slower pace from last month’s record 9.1% reading. The latest CPI number indicates that inflation pressures are somewhat easing, but it remains near record-high levels since the early 1980s.
The slowing inflation rate was mainly due to a 7.7% decline in gas prices, but price drops for used vehicles, airline fares and apparel also contributed. However, prices remain elevated overall in broad categories like shelter and food.
“To really feel like we’ve hit a peak, we need to see a sustained pullback in a broad range of categories, and we’re not seeing that. Some of the sharpest increases in categories like necessities continue, with food prices up at the fastest pace in 43 years.”
- Greg McBride, chief financial analyst at Bankrate.com
What’s Next?
To reduce inflation to a benchmark target rate of 2%, the Federal Reserve (Fed) has already implemented four rate hikes in 2022, including two consecutive 0.75% rate hikes in June and July. However, the latest inflation numbers could take some heat off the Fed for a third consecutive 0.75% rate increase at the upcoming September meeting.
Only time will tell if inflation will cool down. To deal with this uncertainty, it’s best to focus on what individuals can control: their budgets. Many Americans report they’re cutting back on spending, sticking to a budget and building an emergency savings fund to help recession-proof their lives.
Discussing financial and investment goals with a financial advisor can be helpful. If you have additional questions or need resources for financial assistance, speak to your employer.
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