August 10, 2023
We need to have a conversation about inflation because we got some new numbers today that you need to know about.
There’s some bad news and some buried slight good news in today’s inflation report. That I’m going to tell you all about
But before I do, I want you to stop the urge to comment that these numbers are not true and don’t reflect your life. Just because you feel that way doesn’t mean those are the facts when it comes to the average cost for literally every product and service across all states. And even if you still feel that way and can’t get past it, that’s fine — you need to pay attention to these numbers because the federal reserve does. This report, these numbers are the ones that they use to decide whether to increase interest rates on you and me. So don’t you think you should know what they’re looking at?
That’s exactly what I’m going to help you with right now.
I’m going to start with the bad news. And it’s not *that* bad. But for the first time in more than a year – in July, overall inflation increased. Not enough to set off alarms, but still *up*. July inflation was 3.2% higher last year. In June inflation was a 3%. So it increased point two percent month over month. That’s the first time that has happened in 13 months. Not great.
Now – looking at the big picture – 3.2% is still significantly lower than the 9.1% inflation we saw in June of 2022. But 3.2% is not 2%. Which is the federal reserve’s target inflation rate. So where are the increases coming from?
Generally – energy was down between July 2023 and July 2022 except for electricity which was up 3%. And food was still uncomfortably high. In fact it was up almost 5% (4.9%) in July than it was in July 2022. But shelter was really the issue here. I’m talking about rent, mortgages and hotel stays . It came in really hot for July – up 7.7% over last year. Shelter contributed to 90% of July’s inflation.
So let’s talk about this buried slight good news in this report. Overall experts say, yes, inflation was up just that 0.2% in July over June but all the underlying data in the report is showing that the steam and the power that’s been driving all this inflation is finally starting to dissipate from the inflation engine.
Core inflation – which is what the federal reserve really looks at, decreased slightly between July and June. And I mean slightly. Just down by point-one percent. I know that doesn’t seem like a lot but that’s good. Because it adds to a trend. Core inflation has steadily been decreasing month over month for the last four months. Core inflation includes every item and service that is measured, except food and energy. Core inflation includes furniture, housing, clothing, medical services, transportation, and computers just to name a few. The fed says food and energy are so volatile and the prices depend on lots of different outside factors that can’t be predicted. So of course, they look at everything overall, but they pay special attention to those core prices to really see how inflation is impacting American households.
The Federal Reserve is scheduled to meet again to decide whether to raise interest rates again in September. But it’s very possible, they may pause any rate increases because of reports like this one.
Read the Consumer Price Index inflation report for July here.
