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United States wholesale inflation falls in July on declining services costs

12 August, 2017, 00:36 | Author: Samuel Sharp
  • US flag and dollar

"A December rate hike is being priced out of the market".

The consumer-price index, which measures what Americans pay for everything from ice cream to doctor visits, increased 0.1% in July from the prior month, the Labor Department said Friday. Mobile phone prices continued to decline in July, falling 0.3 per cent. Overall prices grew month-over-month for the first time since April.

Food prices rose by 0.2% in July after coming in unchanged in June, while energy prices edged down by 0.1% after tumbling by 1.6% in the previous month. "The inflation outlook will not change drastically anytime soon".

After all, the market now attaches less than a 50% probability to a further rate rise this year, and is even dubious the Fed will hike rates again in 2018.

The Fed is tasked with achieving maximum sustainable employment and stable prices.


The price of new motor vehicles declined for the 6th successive month to give a 0.6% decline over the year while the price of used cars and trucks declined 4.1% over the year. Evans, who has a vote on the Fed's 9-member policy committee this year, is viewed as a leading "dove" - a group of Fed officials who believe it is important to push unemployment as low as possible as long as inflation remains under control.

With a tight and tightening labor market and a subdued Dollars, the case of a slightly stronger underlying inflation pressures continue to be strong, noted Nordea Bank in a research report. That's what markets are counting on, which adds to the upside risk to equity prices once the Fed concedes and winds back its interest-rate tightening intentions.

The government's Consumer Price Index, its broadest inflation gauge, fell short of economists' expectations for a fifth consecutive month. Prescription drug prices also dropped back earlier this year, partly as a correction to strong gains in 2016.

The consumer-price index tends to run a little bit higher than the personal-consumption index, reflecting different methods for calculating inflation. Used vehicle prices have also weakened due to a glut of stock on the market.

In Friday's consumer price report, the Labor Department said food costs increased 0.2 percent last month after being flat in July. Against the South Korean won, the dollar dipped to 1,142.81 won on the inflation numbers, after initially rising to 1,146.41 won earlier on Friday versus 1,144.16 won on Thursday.

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