Associated Press
An inflation measure closely tracked by the Federal Reserve remained low last month, extending a trend of cooling price increases that clears the way for the Fed to start cutting its key interest rate next month for the first time in 4 1/2 years.
Prices rose just 0.2% from June to July, the Commerce Department said Friday, up a tick from the previous month’s 0.1% increase. Compared with a year earlier, inflation was unchanged at 2.5%.
The slowdown in inflation could upend former President Donald Trump’s efforts to saddle Vice President Kamala Harris with blame for rising prices. Still, despite the near-end of high inflation, many Americans remain unhappy with today’s sharply higher average prices for such necessities as gas, food and housing compared with their pre-pandemic levels.
Excluding volatile food and energy costs, so-called core inflation rose 0.2% from June to July, the same as in the previous month. Measured from a year earlier, core prices increased 2.6%, also unchanged from the previous year. Economists closely watch core prices, which typically provide a better read of future inflation trends.
Friday’s figures underscore that inflation is steadily fading in the United States after three painful years of surging prices hammered many families’ finances. According to the measure reported Friday, inflation peaked at 7.1% in June 2022, the highest in four decades.
Friday’s report also showed that healthy consumer spending continues to power the U.S. economy. Americans stepped up their spending by a vigorous 0.5% from June to July, up from 0.3% the previous month.
And incomes rose 0.3%, faster than in the previous month. Yet with spending up more than income, consumers’ savings fell, the report said. The savings rate dropped to just 2.9%, the lowest level since the early months of the pandemic.
The Fed tends to favor the inflation gauge that the government issued Friday — the personal consumption expenditures price index — over the better-known consumer price index. The PCE index tries to account for changes in how people shop when inflation jumps. It can capture, for example, when consumers switch from pricier national brands to cheaper store brands.
In general, the PCE index tends to show a lower inflation rate than CPI. In part, that’s because rents, which have been high, carry double the weight in the CPI that they do in the index released Friday.
In a high-profile speech last week, Fed Chair Jerome Powell attributed the inflation surge that erupted in 2021 to a “collision” of reduced supply stemming from the pandemic’s disruptions with a jump in demand as consumers ramped up spending, drawing on savings juiced by federal stimulus checks.
With price increases now cooling, Powell also said last week that “the time has come” to begin lowering the Fed’s key interest rate. Economists expect a cut of at least a quarter-point cut in the rate, now at 5.3%, at the Fed’s next meeting Sept. 17-18. With inflation coming under control, Powell indicated that the central bank is now increasingly focused on preventing any worsening of the job market. The unemployment rate has risen for four straight months.
Reductions in the Fed’s benchmark interest rate should, over time, reduce borrowing costs for a range of consumer and business loans, including mortgages, auto loans and credit cards.
Consumers are still willing to boost their spending, fueling steady growth in the economy. On Thursday, the government revised its estimate of growth in the April-June quarter to a healthy annual rate of 3%, up from 2.8%.
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Republished with permission of The Associated Press.
12 comments
PeterH
August 30, 2024 at 11:18 am
Great news for retirement voters with investments!
Day 38
August 30, 2024 at 11:49 am
The AP is a propaganda arm of the Democrat Party. Bidenomics has already done its damage. Now maybe the rate of inflation has lowered but those price run ups that happened under the Biden / Harris regime are here and I don’t see them rolling back. Next time you gas your car, get groceries, go to Home Depot, restaurants and such you can thank Bidenomics for this.
PeterH
August 30, 2024 at 12:30 pm
I’m so sorry your life is so so miserable! Why don’t you go out and find gainful employment instead of posting here 24-7? I’m retired and have never felt any impact from the minor inflation or my buying power. You might wonder why jets are packed, restaurants are packed and the EU can’t handle more tourists! LOL
Day 38
August 30, 2024 at 1:13 pm
Peter H, my fake independent friend. Life is good and I am gainfully employed with an excellent job. Thanks for your concern though. It is my mission to bring a different perspective to this left leaning web site and the primarily left leaning, anti-Repub people that participate here. Have to say I’m surprised a retired guy like you isn’t supportive of Trump’s position to not tax social security benefits. A good deal for folks like yourself in Century Village, right?😜
PeterH
August 30, 2024 at 4:44 pm
FUN FACT:
Only 40% of retirees pay taxes on Social Security. I’m one of them because my combined retirement income puts me in a taxable bracket. Like the child tax voucher program …. the elimination of Social Security taxes DOES NOT HELP POOR OR MIDDLE CLASS EARNERS. The breaks help the wealthy. Vouchers are useless to the poor who can’t afford to send their child to a private school REGARDLESS. Furthermore, private schools are limited AND HAVE A WAITING LINE.
Cutting income taxes on Social Security income would ultimately harm the program by cutting off one of its funding sources – taxes — which in turn would likely hasten the insolvency of its trust funds, experts told CBS MoneyWatch. If that occurred, the Social Security Administration could be forced to make larger benefit cuts a year earlier than is now forecast. Today’s Republicans are promoting and promising policies to help themselves while sucker punching MAGA followers who are too uneducated to comprehend that they’re being screwed.
rick whitaker
August 30, 2024 at 8:43 pm
PEACHY MARK, yeah, why are you so miserable? i bet you don’t even have a job. as far as social security goes, it’s great for those who need it and i am for making it work better for people who need it. the greedy maga don’t want anyone to make it with their outlandish policies. i have not spent one cent of my social security checks. i put them into an education account for my grand children. why will you not state what this good job you have is? you live on mamas couch huh? if not, what do you do for a living besides spouting lies, misconceptions and whataboutisms online? no answer, just what i thought.
Day 38
August 30, 2024 at 9:49 pm
There he is again. I missed you angry Rick. You simply have nothing to add except insults and personal attacks. I don’t need to prove myself to you, you bitter old coot. You are like Joe Biden. That dementia is really kicking in as anger is an offshoot from that terrible disease.
rick whitaker
August 30, 2024 at 8:55 pm
PEACHY MARK, the AP is not what you say it is. that is a lie that earl pitts repeats over and over. only a fool would take their cues from earl shitts. you lied again peachy. how long is your nose now?
Day 38
August 30, 2024 at 9:50 pm
Oh and what is it with the name “Mark”? Sounds to me like you are getting lost old man. Do you need help?
rick whitaker
August 31, 2024 at 12:02 pm
PEACHY MARK, let me explain the obvious, when a con like trump or scott fools or cons some one, that person is the victim of the con. the victim of the con is called a mark. a mark is a easily fooled person. so, if you are conned, you are a mark. if you watch fox, then you are a mark by definition.
Tjb
September 3, 2024 at 7:53 pm
To day 38
If trump was elected in 2020, would there been inflation for the last 3plus yrs?
Sundance
September 6, 2024 at 8:23 pm
At 1 Million 499 thousand for a home and a neighbor hood interest rates should be o. K anyway for them. Starter homes from 120 now 359 thousand I think interest is in the principal and taxed on that
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