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U.S. Inflation Eases, but Maybe Not Enough for Fed to Rethink Rate Increases
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Good day. Wednesday’s inflation report keeps the door open for the Federal Reserve to approve a half-point interest rate increase in September if subsequent data confirm price pressures are easing. But a 0.75-point rise remains possible because of the strong labor market and significant gains in pay. Last month, Fed Chairman Jerome Powell said another 0.75-point rate rise could be on the table in September but would “depend on the data we get between now and then.” Mr. Powell has said the Fed needs convincing evidence monthly inflation figures are declining before dialing back rate increases to more-traditional quarter-point increments.
Now on to today’s news and analysis.
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Fed Likely to Want Further Evidence of Inflation Slowdown
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Some Federal Reserve officials have suggested the central bank might lift its benchmark interest rate by half a percentage point in September, less than its recent increases of three-quarters of a percentage point. PHOTO: LEAH MILLIS/REUTERS
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A slowdown in inflation last month, following recent indications of a robust labor market, complicates the Federal Reserve’s decision on how much to raise interest rates next month.
Data on inflation and economic activity are likely to guide whether central bank officials lift their benchmark federal-funds rate by half a percentage point or three-quarters of a point at their Sept. 20-21 policy meeting. They have said they want to see evidence that price pressures and economic growth are cooling before they moderate their pace of rate increases.
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Inflation Tracker: When Will Prices Stop Going Up?
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The Wall Street Journal has put together a price tracker of common items many Americans buy monthly to see the direction of prices that matter to you. It automatically updates with the most recent prices from the CPI.
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U.S. Inflation Eased Slightly to 8.5% in July
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The Labor Department said the consumer-price index rose 8.5% in July from the same month a year ago, down from 9.1% in June. June marked the fastest pace of inflation since November 1981.
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Social Security Benefits Heading for Biggest Increase in 40 Years
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If inflation remains at the current level, on average, over the next two months, approximately 70 million retirees and disabled people could see their monthly Social Security checks rise by about 9.6% in 2023.
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Key Developments Around the World
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Inflation Means Never Having to Say You’re Sorry
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In Japan, businesses routinely apologize to customers, even for small issues. But now with inflation reaching Japan’s shores—after around three decades of stable or falling prices—firms have broken free of the “sorry” pastime.
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China PBOC Says Won’t Flood Economy With Excessive Liquidity
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The People’s Bank of China said in its second-quarter monetary policy report that it would step up support for the economy by reiterating existing measures, adding there are risks of higher consumer inflation.
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Facing Russian Gas Cuts, Europe Dims Lights, Shortens Showers
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Across Europe, national and local governments are pushing piecemeal measures to curtail energy usage as Russia cuts its gas shipments in response to Western sanctions during the war in Ukraine.
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Financial Regulation Roundup
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Equifax Should Face Curbs on Selling Credit Scores, Waters Says
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The chairwoman of the House Financial Services Committee asked the Consumer Financial Protection Bureau to stop Equifax from selling credit scores to lenders until the credit-reporting firm shows it can ensure its scores are correct.
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Regulators Weigh Asking Hedge Funds to Report Crypto Exposure
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The Securities and Exchange Commission issued a proposal that would require large hedge funds to report their cryptocurrency exposure through a confidential filing created after the 2008 financial crisis to help regulators spot bubbles.
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8:30 a.m.: U.S. producer-price index for July
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8:30 a.m.: U.S. import and export price indexes for July
10 a.m.: University of Michigan consumer survey for August (preliminary)
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Fed’s Inflation Battle Is Far From Won
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July’s U.S. core CPI reading is still way too high at 5.9%, and there is one more jobs report, which will be a pivotal report, coming between now and when the Federal Reserve must next act, Aaron Back writes.
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The U.S. federal deficit narrowed by 30% in July compared with a year earlier, as the government reported a $211 billion monthly gap between revenue and spending. The drop is the product of the end of a burst of federal spending last year and rising revenue this year.
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Low water levels along the Rhine are having an adverse effect on German industrial production, which is expected to persist at least until the third quarter of 2022, said Marc Schattenberg, an economist at Deutsche Bank Research. (Dow Jones Newswires)
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The Norwegian krone remains undervalued despite its rally in July but looks set to strengthen further as energy prices remain elevated and markets underestimate the Norges Bank’s policy tightening, according to Bank of America. It said in a note that, “We expect Norges Bank to raise rates to 3% next year—markets price a somewhat lower terminal [peak] rate but a more front-loaded pace.” (DJN)
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Retail sales in Brazil should resume their growth in coming months, after declining in May and June, economists at XP said in a research note. Brazil’s statistics agency said Wednesday that sales dropped 1.4% in June from May and fell 0.3% from a year earlier. (DJN)
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This newsletter is compiled by James Christie in San Francisco.
Send us your tips, suggestions and feedback. Write to:
James Christie, Jon Hilsenrath, Michael S. Derby, Nell Henderson, Nick Timiraos, Paul Hannon, Kim Mackrael, Tom Fairless, Megumi Fujikawa, Perry Cleveland-Peck, Michael Maloney, Paul Kiernan, James Glynn
Follow us on Twitter:
@WSJCentralBanks, @NHendersonWSJ, @michaelsderby, @NickTimiraos, @PaulHannon29, @kimmackrael, @TomFairless, @megumifujikawa, @pkwsj, @JamesGlynnWSJ, @cleveland_peck
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