United States Inflation July 2018

United States

United States: Inflation stable in July at six-and-a-half year high

August 10, 2018

Consumer prices rose 0.2% from the previous month in July, up from June’s 0.1% increase. The result was in line with market expectations and was driven by a 0.3% month-on-month increase in prices for shelter, which represented more than half of the overall print. This more than compensated for lower energy prices, which recorded their second consecutive monthly decline as electricity and utility gas prices fell, as did prices at the pump. Meanwhile, inflation was stable at June’s 2.9% in July, the highest figure in six-and-a-half years.

Core consumer prices, which exclude volatile items including food and energy prices, also rose 0.2% from the previous month in July, unchanged from June and in line with market expectations. Aside from the increase in shelter prices, the figure reflected higher prices for transportation services and vehicles: Used vehicles and trucks recorded their biggest monthly price gains of the year. However, lower prices for apparel and medical care commodities weighed on the reading.

The most noteworthy reading in this July report was core inflation, which ticked up from 2.3% in June to 2.4% in July—the highest print in almost 10 years. With core PCE inflation—the Federal Reserve’s preferred measure of inflation—poised to follow a similar trend, this figure will likely be of importance for the next monetary policy decisions. As of its 12–13 June meeting, the Fed had signaled that its members were leaning towards four interest rate hikes in 2018. With the current strength of core consumer price pressures, and the prospect of additional impact on prices from the ongoing and escalating trade dispute between the United States and China, the July core inflation reading will likely push the Fed to be more hawkish, which makes the case for a fourth rate hike this year even more likely. The majority of our panelists expects two rate hikes to be delivered at the September and December Fed meetings, respectively. The next FOMC meeting is set for 25–26 September.

FocusEconomics Consensus Forecast participants expect inflation to average 2.5% in 2018, which is unchanged from last month’s forecast. For 2019, the panel expects inflation to average 2.3%.


Author:, Economist

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USA Inflation July 2018

Note: Year-on-year and month-on-month variation of seasonally-adjusted consumer price index in %.
Source: Bureau of Labor Statistics.


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