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U.S. consumer prices push higher; high unemployment likely to keep lid on inflation


REUTERS/Brendan McDermid/File Photo

U.S. consumer prices rose more than expected in July, with a measure of underlying inflation increasing by the most in 29-1/2 years amid broad gains in the costs of goods and services.


The report from the Labor Department on Wednesday, however, probably does not mark the start of worrisome inflation, and the Federal Reserve is likely to continue pumping money into the economy to aid the recovery from the COVID-19 recession.


The jump in prices is likely an unwinding of sharp declines experienced when nonessential businesses were shuttered in mid-March to slow the spread of the coronavirus. The higher prices further dispel fears of deflation, a decline in the general price level that is harmful during a recession as consumers and businesses may delay purchases in anticipation of lower prices.


“This should end any speculation that the pandemic-related slump in demand will quickly push the economy into a deflationary spiral,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto. “But this is not a sign that the U.S. is instead about to experience a bout of much high inflation because of supply restrictions.”


The consumer price index rose 0.6% last month, with gasoline accounting for a quarter of the gain. The CPI increased by the same margin in June. In the 12 months through July, the CPI accelerated 1.0% after climbing 0.6% in June.


12 August 2020

News Source Reuters

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