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The July CPI report shows inflation edges higher, interrupting a year-long steak of waning price increases. Although prices have steadily eased over the past year, the Fed officials still seem divided on whether to raise interest rates in September or hold them steady.
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The consumer price index (CPI) increased 3.2% year-over-year in July. Prices rose a seasonally adjusted 0.2% for the month, in line with the Dow Jones estimate. But the annual rate was slightly below the 3.3% estimate though higher than in June, resulting in the first increase in more than a year. Also, the core CPI maintained a 12-month rate of 4.7%.
Over the past year, inflation in the U.S. has dropped from nearly 9% to 3.2%, softening most of the price pressures that have gripped the country for more than two years. While inflation has come well off its 40-year highs of mid-2022, it is still well above the Fed’s 2% target.
Fed officials are divided on whether to raise interest rates next month for the 12th time to cool the economy or hold them steady. Fed governor Michelle Bowman said last week at an event in Atlanta that additional increases would be likely needed to lower inflation to the FOMC’s goal.
On the other hand, Philadelphia Fed President Patrick Harker said, “I believe we may be at the point where we can be patient and hold rates steady.” Further, while Carol Schleif, chief investment officer at BMO Family Office, expects the central bank to hold rates steady in September, the job market’s strength could still give the Fed “ample room” to hike again.
Indeed, the officials unanimously voted to increase rates by 25 basis points to a range of 5.25%-5-5%, the highest level in more than…
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