Inflation expected to slow to 5.2 percent by the end of 2022
The BLS has released the July Consumer Price Index report showing that prices held steady last month, meaning that inflation may be easing across the market
Average prices in the United States held steady in July, halting over a year of historic inflation increases month after month. Last month, prices increased on average 1.3 percent across good markets, leading a 9.1 year over year surge in prices.
In July, prices went down, rather, they did not inch up any further on average.
The Federal Reserve whose mandate is to keep inflation under control predicts inflation to come down to around 5.2 percent by the end of the year. This figure provided by the Fed does not include indexes food and energy commodities --two of the sectors that saw the largest price spikes. From January to July the Consumer Price Index (CPI) for all goods minus food and energy hit 5.9 percent. If the CPI tracks decreases in price through the rest of the year, hitting the Fed’s projection is not out of the question.
In order to bring inflation down, the Federal Reserve has bumped up interest rates by 1.5 percent at historic pace. By increasing rates the Fed hopes to slow the movement of money throughout the economy. Some like Senator Elizabeth Warren (D-MA) have pointed out that the Fed is not able to confirm that this dramatic move to increase rates will lead to price reductions for households.
We are not out of the woods yet
While overall prices did not increase last month, some sectors did see continued prices trend upward. For instance, food both in and outside the home increased 1.1 percent. This was the second highest bump in price seen in the food market this year with the only month recording higher prices being May, when the CPI tracked a 1.2 percent increase.
However, other commodities like piped natural gas and other utilities, saw a decrease in price of 3.6 percent compared to those tracked in June. Energy commodities saw prices come down in significant ways in July, as the effects of Biden’s executive action take effect.
After the Russian invasion of Ukraine, President Biden placed an import ban on Russian energy imports in an attempt to weaken their economy. As supply was cut off and Russia’s production and logistical capabilities declined, oil prices went soaring globally. The actions taken by Biden to release one million barrels of oil a day from the strategic reserve has led to the quickest decrease in gas prices in decades. However, based on the capacity of the national reserves it is unclear how long the country and risk taking from this source.
According to the Department of Energy, the national reserves can house 729 million barrels of crude oil, but the current levels barley scratch 500 million barrels. The United States is using on average 98 million barrels of oil a day. Meaning that if the country were completely reliant on its national reserves, it would have just a few days of supply. Interestingly, Russian officials have stated publicly that they have over fifty-nine years of oil and one hundred and three years worth of gas in their national stocks.
Depending on how the war progresses, the US may need to continue to rely on the reserves but these are finite. Additionally, the flows of Russian gas into Europe has significantly increased demand for oil and gas from other places and the US will try and fill as many gaps as it can without disrupting its domestic market to the points seen early this summer.