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Inflation Remains High, but Drops to 8.5% in July

crecimiento de la inflación

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Inflation slowed during the month of July, totaling 8.5 % YoY. In June, inflation reached a 40-year high of 9.1 % YoY.

During July, prices increased by 1.3 % with respect to the previous month. Core inflation, which excludes changes in the prices of more volatile goods and services such as food and energy, totaled 5.9 % YoY.

The reduction in inflation growth is mainly due to a decrease in the cost of energy, especially fuels such as gasoline and diesel.

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The cost of gasoline decreased by 7.7% during the month of July, after peaking at over $9 a gallon. The reduction in fuel prices in the United States has been mainly due to the drop in the price of oil.

Food prices rose 1.3% during July, and accumulated an annual increase of 13.1%, the largest increase in food prices since 1979.

The cost of used cars, which rose sharply during the pandemic, declined in July, as did airline fares. Rent costs continue to rise, as do medical services.

Inflation growth slowed as the economy enters a technical recession

High inflation was driven in part by low-interest rates and three government stimulus plans that released trillions of dollars into the economy.

Price increases have become persistent in the U.S. economy, while the labor market continues to add jobs at an accelerating pace. For the month of July, the unemployment rate returned to a pre-pandemic 3.5%.

The White House has taken advantage of the public’s concern over the rising cost of living and passed a $357 billion-plus spending plan called the “Inflation Reduction Act,” which according to the U-Penn budget model does little or nothing to reduce inflation in the near term.

The inflation data has led the Federal Reserve (Fed) to implement an aggressive policy to limit the amount of money circulating in the economy by raising the interest rates at which it lends to commercial banks, thus raising the cost of credit.

The monetary tightening policy looks set to last until the end of 2023, when, according to the Fed, inflation will return to its long-term target of 2% per annum.

Some economists fear that the contractionary policy may affect the growth of the economy, as the United States adjusts two-quarters of negative economic growth, which means that the country has entered a technical recession.

Despite the reduction in the pace of inflation, the unusually rapid rise in prices could persist until 2023 according to Fed forecasts. Some economists, including European Central Bank President Christine Lagarde, believe that the world will not see the low inflation it has been accustomed to for some time.

 

Economist, writer and liberal. With a focus on finance, the war on drugs, history, and geopolitics // Economista, escritor y liberal. Con enfoque en finanzas, guerra contra las drogas, historia y geopolítica

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