The US consumer price index is expected to post a slower increase in July as petrol prices dropped across the country, but inflationary pressures will remain close to 40-year highs in the world’s largest economy.
According to economists surveyed by Bloomberg, CPI figures to be released on Wednesday at 8.30am Eastern time will show an 8.7 per cent annual increase last month compared to July 2021, and a 0.2 per cent increase compared to June. These numbers would mark a slight easing of inflation compared with the 9.1 per cent annual increase and the 1.3 per cent monthly rise recorded in June.
However, they are unlikely to represent a large enough shift to stop the Federal Reserve from ploughing ahead with more aggressive tightening of monetary policy to subdue inflation.
While the core measure of CPI — which strips away more volatile food and energy prices — is expected to record a smaller monthly increase of 0.5 per cent compared to 0.7 per cent June, on an annual basis it is expected to accelerate to 6.1 per cent from 5.9 per cent.
The inflation data will be released following a strong jobs report last Friday that stamped out fears of a near-term recession but suggested the Fed was struggling to cool down the overheated economy.
It comes as the administration of president Joe Biden and congressional Democrats have been celebrating the passage through the Senate of a $700bn climate, tax and healthcare bill that represents a crucial pillar of the president’s economic agenda.
While they have dubbed it the Inflation Reduction Act, the bill is not expected to have a significant effect on prices in the short term. However, certain measures are designed to reduce costs over the medium and long term, including a provision allowing the government to negotiate prescription drug prices.
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