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Further Indications of Broad U.S. Price Pressure Expected Today
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Good day. Economists surveyed by The Wall Street Journal expect the U.S. consumer-price index for July to be reported today will be up 8.7% from the same month a year earlier. They also expect the Core CPI, which excludes often volatile energy and food prices, to accelerate by 6.1% over the same period, a sign that broad price pressures remain in the economy. The Federal Reserve faces the challenge of tightening monetary policy to curb inflation without setting off a recession. Fed officials lifted interest rates in June and July, and are expected to raise rates again in September. Fed Chairman Jerome Powell has said the central bank wants to see clear and convincing evidence that price pressures are subsiding before slowing or suspending rate increases.
Now on to today’s news and analysis.
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U.S. to Report July Inflation as Economy Cooled
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The average price of a gallon of regular gas nationally was $4.03 on Tuesday, almost $1 cheaper than in mid-June. PHOTO: BRANDON BELL/GETTY IMAGES
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U.S. inflation likely remained close to a four-decade high in July despite cooling energy prices, economists say.
The Labor Department on Wednesday is estimated to report that the consumer-price index rose 8.7% in July from the same month a year ago, down from 9.1% in June, according to economists surveyed by The Wall Street Journal. June marked the fastest pace of inflation since November 1981.
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How High Is Inflation and What Causes It?
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Inflation is one of the most vexing issues facing economists and government policy makers, and is a factor raising the risk of U.S. recession. The causes are myriad, and the tools usually deployed to tame price pressures can, in some scenarios, push the economy into a recession. Here’s what to know.
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U.S. Productivity Falls for Second Straight Quarter
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U.S. nonfarm labor productivity fell at a seasonally adjusted annual rate of 4.6% in the second quarter from the prior quarter, the Labor Department said. Economists surveyed by The Wall Street Journal had estimated a drop of 5%.
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Sunbelt Land Boom Brings Big Profits and Big Risks
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Fast-growing Sunbelt cities are experiencing a land rush, sending investors, moguls and professional athletes like championship golfer Phil Mickelson rushing to buy empty lots while lifting land values to new heights.
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Key Developments Around the World
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In China, Higher Consumer Inflation Masks Weak Demand
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China’s headline consumer inflation rate surged to its fastest pace in two years in July—by 2.7% compared to a year earlier—but a drop in core inflation points to a different problem: weak domestic demand.
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How the Rajapaksa Political Clan Led Sri Lanka to Catastrophe
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Gotabaya Rajapaksa governed in a way that deepened family rivalries and led to decisions that ultimately had catastrophic consequences for Sri Lanka’s economy, former cabinet members and aides say.
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Thailand’s Central Bank Raises Rate to Help Control Inflation
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Thailand’s central bank raised its policy rate for the first time in nearly four years in a bid to help control inflation. The policy committee voted six to one to increase its one-day repurchase rate by 25 basis points to 0.75%, effective immediately.
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Russia Stops Oil Flowing Through Pipeline to Central, Eastern Europe
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Russian oil has stopped flowing through a pipeline that feeds countries in Central and Eastern Europe, dealing another blow to a region contending with the loss of vital energy supplies from Russia.
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Financial Regulation Roundup
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Coinbase Posts Steep Second-Quarter Loss Amid Crypto Meltdown
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Coinbase Global Inc. lost $1.1 billion, or $4.98 a share, in the second quarter, the company said Tuesday, compared with a profit of $1.6 billion, or $6.42 a share, a year ago. Revenue fell to $808 million from $2.2 billion a year ago.
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Inflation Reduction Act Includes $27 Billion in Green Funds
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The energy package recently passed by the Senate includes $27 billion for what are called green banks that funnel money into renewable projects, although some of the biggest beneficiaries could be private-sector investors.
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8:30 a.m.: U.S. consumer-price index for July
12 p.m.: Online Q&A session with Bank of England Chief Economist Huw Pill
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8:30 a.m.: U.S. producer-price index for July
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Goldman Sachs Sees U.S. Core CPI Slowing by December
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Increases in U.S. consumer-price index inflation are likely to remain between 0.4% and 0.5% “for the next couple months,” Goldman Sachs economists wrote in a report, adding they expect core CPI to slow to between 0.3% and 0.4% by December. They also forecast year-over-year core CPI inflation of 6.1% in December, 2.7% in December 2023, and 2.8% in December 2024. “Our forecast reflects a negative swing in health insurance prices and a larger slowdown in goods than in services inflation next year,” the report said.
—Paulo Trevisani
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Inflation Reduction Act Could Supercharge Grid Energy Storage
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The tax credit that helped push solar and wind power to the mainstream is now coming to U.S. energy storage.The Inflation Reduction Act extends to stand-alone energy storage a tax credit that covers 30% of the size of the investment, writes Jinjoo Lee.
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Confidence among U.S. small-business owners rose in July, reflecting improved expectations about business conditions, but still remained below its 48-year average of 98 on the NFIB Small Business Optimism Index. The index climbed to 89.9 from 89.5 in June. Economists expected the index to come in at 89.5, according to a poll carried out by The Wall Street Journal. (Dow Jones Newswires)
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Brazil’s inflation rate fell in July, pulled down by tax cuts to fuels, electricity and other items. Consumer prices fell 0.68% from June, the biggest decline in the month since the current inflation series began in 1980, the Brazilian Institute of Geography and Statistics said. It added that prices rose 10.07% from a year earlier, the smallest increase this year. (DJN)
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Mexican inflation accelerated in July, reaching its highest level in more than 21 years, led by rising food prices, the National Statistics Institute said. The country’s consumer price index rose 0.74% to push the 12-month inflation rate up to 8.15% from 7.99% in June, reaching its highest level since December 2000. (DJN)
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Holders of Ukraine’s GDP-linked securities voted overwhelmingly to allow the war-torn country to change the terms on a series of securities, according to a preliminary tally of votes. The securities were issued after Ukraine’s government narrowly avoided default in 2015, with the country reaching a debt-relief deal with its creditors. Private creditors agreed to a 20% write-down in the face value of their Ukrainian bonds, and to push back maturities on government debt by four years. (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
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@WSJCentralBanks, @NHendersonWSJ, @michaelsderby, @NickTimiraos, @PaulHannon29, @kimmackrael, @TomFairless, @megumifujikawa, @pkwsj, @JamesGlynnWSJ, @cleveland_peck
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