Inflation in the United States holds steady at 2.7% in the month of July
In July 2022, consumer prices saw a slight increase of 0.2%, matching the pace set in June but falling slightly short of the expected 2.8%. This rise was observed despite the ongoing tariff truce between the US and China, which was extended by former President Trump until November 2022.
The tariff truce, which imposes 30% tariffs on Chinese goods and 10% on US goods, has provided some relief for supply chains and businesses. By freezing tariffs at existing levels, the extension has prevented a sudden spike in import costs that would likely have been passed on to consumers.
However, it's important to note that the tariff truce has not directly resulted in broad, immediate reductions in consumer prices across sectors. The impact on consumer prices has been mainly indirect, through preventing new tariff-driven cost shocks rather than immediate price reductions.
Other categories posting gains in July 2022 included medical care, airline fares, and household furnishings. In contrast, the indexes for energy and gasoline declined during the same period.
Core inflation, which excludes volatile food and energy prices, rose 0.3% on a monthly basis in July 2022. From a year earlier, core CPI accelerated to 3.1%. This suggests that underlying inflationary pressures remain strong, despite the relatively stable consumer prices.
Investors are betting that the inflation report is tame enough for the Federal Reserve to cut interest rates multiple times this year. Traders have increased their expectations for additional cuts in October and December, with the market currently pricing in a nearly 91% chance of a rate cut next month.
The U.S. Bureau of Labor Statistics reported the inflation figure on Tuesday, providing valuable insights into the current state of the economy. Despite the ongoing tariff truce, it remains to be seen how these economic factors will evolve in the coming months.
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