Inflation may have peaked, but jdlahart explains why the Fed won’t back off WSJWhatsNow
on overnight rates by three-quarters of a percentage point when they meet in two weeks. That shifts investors’ focus to what might happen at the Fed’s subsequent policy-setting meeting in late September. By then, the picture could look different, asStart with gasoline. The average price of a gallon of regular in June was $4.93, according to the Energy Information Administration, up from $4.44 in May. But pump prices have been falling, with regular fetching $4.65 as of Monday.
Prices for a variety of other inflation drivers have also been falling. The S&P GSCI agriculture index, which includes crops such as corn and cocoa, has fallen by a quarter since its May peak, while the industrial-metals index has fallen by a third. Wholesale used-vehicle prices slipped in June from May,How concerned are you about inflation over the next year? Join the conversation below.
Meanwhile, excess inventories are leading retailers such as Walmart and Target to put more items on sale. For many of the goods that Americans loaded up on since the pandemic struck, such as appliances and furniture, there should be markedly less inflation, or outright price declines, in the months ahead.
The degree to which inflation cools, and how the Fed might respond, is the big question. Price relief won’t be showing up everywhere., and because the Labor Department uses rents to impute homeowners’ shelter costs, the effect will be pronounced. Rents and imputed rents account for 31% of consumer spending, by the Labor Department’s measure, and 40% of core spending.
As inflation climbs in the U.S., rising food and energy costs have pushed the nation’s most popular price index to its highest level in four decades. WSJ’s Gwynn Guilford explains how the consumer-price index works and what it can tell you about inflation. Illustration: Jacob Reynoldscome down markedly, the Fed may worry the reprieve is only temporary.
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