


Inflation rose slightly to a 3.2% rate for the year ending in July, the first increase after a full year of declines, the Bureau of Labor Statistics reported Thursday in an update to the consumer price index.
Investors had expected a slight uptick.
On a month-to-month basis, inflation was 0.2%, in line with expectations.
The Federal Reserve has been hiking interest rates for more than a year, and had seen success in meaningfully bringing down inflation since the tightening cycle began in earnest last March.
The central bank’s target rate is now 5.25% to 5.50%, with the most recent rate hike — and perhaps its last — coming last month.
Meanwhile, “core inflation,” which strips out volatile food and energy prices, rose to 4.7% in the year ending in July.
Soaring inflation has battered households over the past two years and eroded support for Biden and his economic agenda. Republicans have used the rising prices as a weapon to attack the administration and have blamed big spending bills, such as Biden’s pandemic relief legislation, as major drivers of inflation.
But a slew of recent positive economic has caused the administration to pivot toward a messaging campaign focused on the bright spots in the economy, with the White House branding the developments as proof of “Bidenomics” in action.
The labor market is still going strong, defying expectations from even just six months ago that the economy could be entrenched in a recession by now. While job growth slowed to 187,000 last month, it still remains positive and the unemployment rate is sitting at a historically low 3.5% level, matching where it was just prior to the pandemic taking hold.
Additionally, GDP growth for the second quarter also outpaced consensus expectations at a 2.4% annual rate — showing that the economy is still humming right along despite the Fed raising interest rates to the highest level in more than two decades.
The Fed has raised rates by an aggressive degree over the past 17 months, at times conducting rate revisions three times the size of the typical increase. Many economists — given some indications of a slowing labor market and the declines in inflation — expect that the Fed’s quarter of a percentage point hike last month will be the last of this year.
At a recent press conference, Fed Chairman Jerome Powell revealed that central bank staff no longer expect a recession, further bolstering the notion that the Fed can pull off an elusive “soft landing.” That announcement was significant because just months before it was revealed that Fed staff had been penciling in a mild recession this year.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
Still, while the overall economy has held up strikingly well despite the rate revisions, the hikes have trickled down to consumers in the form of rising mortgage rates, making housing more unaffordable and hobbling the previously red-hot housing market.
Mortgage rates have now risen to over 7%, the highest they have been since November and a far cry from the sub-3% bargain mortgage rates consumer locked in at the height of the pandemic.