US inflation eases to 8.5% in July as energy costs dip – Times of India

US inflation decelerated in July by more than expected, reflecting lower energy prices, which may take some pressure off the Federal Reserve to continue aggressively hiking interest rates.
The consumer price index increased 8. 5% from a year earlier, cooling from the 9. 1% June advance that was the largest in four decades, Labor Department data showed Wednesday. Prices were unchanged from the prior month. A decline in gasoline offset increases in food and shelter costs.
The data may give the Fed some breathing room, and the cooling in gas prices, as well as used cars, offers respite to consumers. But annual inflation remains high at more than 8% and food costs continue to rise, providing little relief for US President Joe Biden and the Democrats ahead of midterm elections.
While a drop in gasoline prices is good news for Americans, their cost of living is still painfully high, forcing many to load up on credit cards and drain savings. After data last week showed still-robust labour demand and firmer wage growth, a further deceleration in inflation could take some of the urgency off the Fed to extend outsize interest-rate hikes.
Even though inflation decelerated, Fed officials have said they want to see months of evidence that prices are cooling. They’ll have another round of monthly CPI and jobs reports before their next policy meeting on September 20-21.

While prices are showing signs of moderating, there are several factors that risk keeping inflation high. Housing costs are a big one, as well as unexpected supply shocks. And wages are still climbing at a historically fast pace, concerning some economists of a so-called wage-price spiral. However, those gains aren’t keeping up with inflation. A separate report showed real average hourly earnings fell 3% in July from a year earlier, dropping every month since April 2021. The impact of inflation on wages has started to dent spending, with the pace of personal consumption growth decelerating between the first and second quarters.
Stocks surged and bond yields fell as softer-than-expected inflation data fuelled bets the Federal Reserve could pivot to a smaller pace of hikes. Traders went risk-on Wednesday, with the S&P 500 (up 2%) on pace for its highest level since May. A surge in the Nasdaq (2. 6%) drove the tech-heavy gauge about 20% above its June low. The Cboe Volatility Index slumped below 20, a level last seen in April.