Image Source: The Jakarta Post
The pace of price hikes in the US slowed down last month, but they still increased quickly. According to the Labor Department, the annual inflation rate, which measures how quickly prices rise, dropped from June’s peak of 9.1% to 8.5% in July.
Aside from energy, prices for a wide range of goods, such as groceries and housing, kept rising. As a result, many families are struggling as a result of the increasing costs, which have also had a huge effect on the economy.
The rate of job growth is still solid, but concerns about the rising prices—which are rising more quickly than they have since the early 1980s—have hurt other measures, such as consumer and business morale.
The US grocery price increase over the last year was 13.1%, the highest yearly increase since 1979. These expenditures increased in July as a result of rising coffee prices, which have increased by 3.5% since June.
The cost of housing, healthcare, and recreation increased from June, although these increases were partially offset by decreases in the cost of used automobiles, air travel, and apparel.
In comparison to June, when gas prices had risen to an all-time high of more than $5 per gallon on average, they were down 7.7%.
The opinions of analysts on US inflation
According to Capital Economics’ senior US economist, Paul Ashworth, the fall in inflation is still not what the US Central Bank is aiming for. He did, however, concede that it was a positive beginning, and over the coming several months, it is anticipated that costs will decline.
Since last year, prices in the US have been rising quickly due to a variety of factors, including increased consumer demand, whose spending was encouraged by Covid-19 checks from the government.
At the same time, shortages of goods, especially necessities like wheat and oil, have been caused by pandemic-related shutdowns in China, the Ukrainian conflict, and other problems.
Since March, the US central bank has been increasing interest rates in an effort to keep prices stable.
One method of attempting to control inflation is by raising interest rates, which make borrowing more expensive and should encourage individuals to borrow less and spend less, therefore decreasing demand and raising prices.
However, the bank runs the risk of sending the economy into a protracted slump or recession because higher interest rates slow down economic activity. The US Commerce Department announced this month that the economy contracted from April through June, marking the second consecutive quarter of decline.
The decline in oil prices over the past several weeks has resulted in lower fuel prices for customers as a result of expectations of a slowdown both domestically and internationally.
Silvia Dall’Angelo, a senior economist at Federated Hermes, predicted that demand would continue to decline in the upcoming months as the bank’s rate increases take effect and consumers cut down on their spending due to persistently high costs.
“This should cause inflation to decline more swiftly over the course of next year, together with stabilizing energy costs and a gradual easing of global supply limitations,” she said.
She continued that the Fed will take some solace from today’s inflation news, but the battle against high inflation is far from done.