THE’inflation in the United States It turned out slightly better than expected at July 2024. According to the U.S. Bureau of Labor Statistics (BLS), consumer prices recorded a growth of 0.2% on a monthly basisversus -0.1% in the previous month and compared to the +0.2% expected by analysts.
THE consumer price data for the month of July they suggest that the Federal Reserve remains on track to meet its 2% target, which should allow the central bank to focus more on its other goal of maximizing U.S. employment. While a rate cut at the September meeting is now a given, there remains considerable uncertainty over the magnitude of the rate cut, which will be 25 or 50 basis points.
President Biden’s comment
The consumer price index report (+0.2% month-on-month as expected and +2.9% year-on-year below the +3% expected) published on August 14 “shows that We continue to make progress in the fight against inflation and in reducing costs for American families.” This was stated by the President of the United States, Joe Biden.
In fact, American inflation “has fallen below 3% and core inflation has fallen to its lowest level since April 2021 – he added – We have still a lot of work to do to reduce costs for hard-working Americans, but we’re making real progress, with wages rising faster than prices for 17 straight months.”
“Prices are still too high,” Biden stressed. Big companies are sitting on record profits and aren’t doing enough to lower prices. That’s why we’re taking on Big Pharma to lower prescription drug prices. We’re cutting red tape to build more homes while taking on corporate landlords who unfairly raise rent. And we’re taking on price gouging and junk fares to lower everyday costs, from groceries to air travel. Congressional Republicans would raise prices for middle-class families while cutting taxes for billionaires and corporations. While they try to take us back, we’ll fight for the future.”
Data in line with expectations
Data from the Labor Department showed that July consumer prices were in line with expectations, both for the index headline (up 0.2% m/m and slowing to 2.9% y/y from 3% previously, the lowest level since March 2021) both for that core (0.2% m/m, from 0.1% previously and decelerating year-on-year to 3.2% from 3.3%).
“The latest inflation data reveals a modest but steady increase – commented Mario Di Marcantonio, economist of Intesa San Paolo – Housing costs remain a significant factor, with the expected moderation yet to materialize, despite the continued slowdown in market rental prices. Non-housing services continue their recent stabilization trend, while deflationary pressures on basic goods have intensified. Energy prices have stabilized, although their contribution to inflation remains limited.”
As for the index excluding food and energy, the greater contribution on the upside came from the acceleration of housing services (0.4% m/m, 5.1% y/y); in particular, the growth was driven by both components, the owner-occupied rent equivalent, which increased by 0.4% m/m (5.3% y/y) and the effective rent, which increased by 0.5% m/m (5.1% y/y).
“This report should help solidify expectations for another 0.2% MoM and very likely 0.1% for the Fed’s preferred measure of inflation, the core PCE deflator, in a couple of weeks,” commented James Knightley, Chief International Economist at ING – This would ensure a Fed rate cut in September in light of the cooling labor market and weakening business surveys, as just a matter of size. For now, we prefer a 50bp to start, while the Fed makes up ground on the data before returning to 25bp moves later.”
