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Inflation is slowly rising, but not surging out of control. That should provide some flexibility for Fed officials to cut interest rates in September if the job market continues to weaken.
“Overall, inflation remains well-behaved,” writes Oren Klachkin, a financial markets economist at Nationwide. Price growth largely matched expectations, with headline inflation steady at 2.7% year over year in July, though the annual increase in core CPI did jump to 3.1% from June’s 2.9% pace.
Still, the latest data should help alleviate fears of deep stagflation, with a sharp increase in prices derailing cuts to interest rates regardless of a weakening economy and employment. While the effect of higher tariffs are visible in the July CPI data, the rate at which they are flowing through to consumers remains manageable, at least for now.
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