The latest price data will show whether inflation has continued to decline
(WASHINGTON) – The release of inflation data on Tuesday will show whether near-historic inflation in the country continues to slow.
The data, which will reveal how prices fared in August, comes just over a week before Federal Reserve officials are due to meet to determine what investors expect to be another rise in the cost of borrowing to fight inflation.
The most recent Consumer Price Index, or CPI, data showed a slowdown in price increases. The CPI rose 8.5% over the past year in July, a marked slowdown from 9.1% in June, according to the Bureau of Labor Statistics.
The August report is expected to show the CPI rose 8% year-on-year in August, continuing its descent from June’s peak, according to a Bloomberg survey of economists.
The Fed has instituted a series of aggressive interest rate hikes over the past few months as it attempts to rein in price increases by slowing the economy and stifling demand. But this approach risks tipping the United States into an economic downturn and putting millions of people out of work.
Rate increases appear to have slowed key sectors of the economy, pushing up mortgage rates and slowing new home construction, for example.
But other indicators suggest the US economy is still buzzing. Hiring in the United States fell from its torrid pace but remained robust in August, with the economy adding 315,000 jobs and the unemployment rate hitting 3.7% as more people searched for work, according to the data released by the Bureau of Labor Statistics in early September.
Speaking at a conference hosted by the conservative-leaning Cato Institute, Fed Chairman Jerome Powell said on Thursday that the central bank needed to act “boldly, strongly” to reduce inflation, which has led many economists to expect another 75 basis point interest rate hike from the central bank later this month.
The Fed is performing a “tricky balancing act,” said Scott Schuh, an economics professor at West Virginia University. “The Fed is raising rates but trying to avoid an increase in the unemployment rate.”
“It seems quite reasonable to expect the inflation rate to continue to decline over the coming months and quarters,” he added.
Prices in some sectors of the economy have already fallen considerably.
The national average price for a gallon of gasoline stood at $3.72 on Monday, after falling well below a high of $5.01 in mid-June, according to AAA.
Consumer expectations for inflation have also fallen significantly, according to data released by the New York Federal Reserve on Monday.
In August, the median of consumer responses showed they expected inflation to fall to 5.7% in one year and 2.8% in three years, according to a Federal Reserve survey of New York. Those numbers were down from 6.2% and 3.2%, respectively, in July.
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