Headline CPI eased in July to 8.5% year-over-year from 9.1% in June. Still above the Federal Reserve’s (Fed) long-run target rate, the annual rate of inflation seems to be cooling. Inflation is easing as durable goods prices continue their descent from recent highs. For example, prices for appliances have declined for three out of the last four months and used vehicle prices declined four out of the last six months. “The July inflation report should change market expectations about future Fed activity,” explained Jeffrey Roach, Chief Economist for LPL Financial. “As inflation eases, the Fed can now tighten monetary policy at a slower pace.” The Fed still has a lot of work to do, but pricing pressures seem to be easing. The latest inflation report is welcomed news and could add support for the Fed to raise rates at a slower pace in September.
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