US CPI gains slow to 2.9% in July, core prices at 3.2%

14th Aug 2024 12:25

(Sharecast News) - The cost of living in the US rose in July at its slowest pace in over three years.

According to the Department of Labor, the Consumer Price Index increased at a month-on-month clip of 0.2% at both the headline and core level.

That was just as expected by economists.

The annual rate of increase in headline CPI however slipped from 3.0% for June to 2.9% in July - its slowest pace since March 2021.

Economists had anticipated headline CPI would remain at 3.0%.

Core CPI also saw the year-on-year rate slow, but from 3.3% to 3.2%, meeting forecasts.

In terms of the monthly comparison, energy prices were unchanged while those for food increased by 0.2%.

Shelter price growth reverted from 0.2% in June to 0.4%, the same clip that had been seen since February.

Transportation services also rose by 0.4%, while those for medical care commodities were up by 0.2%.

Paul Ashworth, chief North America economist at Capital Economics, noted that the gain in the all-items CPI was 0.15% when rounded to two decimal places and of 0.18% at the core level.

Together, the CPI and producer price data, of which the latter had been published the day before, pointed to a 0.17% month-on-month increase in the core price deflator for personal consumption expenditures covering that same month.

Core PCE prices were the Fed's target measure for inflation.

"Overall, July's CPI report is probably best described as mildly encouraging - it adds support for a 25bp rate cut in September but, at the same time, doesn't suggest price pressures are collapsing in a way that could warrant a bigger 50bp reduction."

However, ING chief international economist, James Knightley, believed that with inflation still on track to hit its 2.0% target, the Fed would be increasingly focused on maximising employment.

Knightley was still expecting a 50 basis point rate cut from the Fed in September, followed by 25bp moves afterwards.

"A soft payrolls and another move higher in the unemployment rate and then a 50bp move looks assured. A strong jobs number and perhaps a dip in the unemployment rate back to 4.2% and it will be a 25bp cut."