August 18

8/18 – After peaking at 9% in June 2022 (CPI year-over-year), then falling to a low of 2.3% in April, inflation appears to be on the rise again. In last week’s CPI report, the July inflation rate for all goods was steady at 2.7%, while core CPI (excludes food & energy) jumped to 3.1%. The Fed’s preferred inflation measure, the PCE price index, jumped from 2.3% to 2.6% in June, while core PCE rose from 2.7% to 2.8%. And the producer price index increased by 0.9% in July, the largest monthly advance since June 2022. A 38.9% jump in the cost of vegetables could indicate deportation-driven labor issues at the farm level. A 3% (CPI/PCE) level is where the Fed probably would have considered raising interest rates. However, given the recent dismal employment report – and intense pressure from the White House – the Fed is likely to lower rates in Sept and put jobs market concerns ahead of inflation worries.