Highest Core Inflation in Decade Flattens Real U.S. Wage Growth
(Bloomberg) A gauge of U.S. consumer prices jumped by the most in a decade in July, eating into wage gains that have barely budged in the past four months and strengthening the case for the Federal Reserve to keep raising interest rates gradually. The core measure of the Consumer Price Index, which excludes food and fuel, rose 2.4 percent from a year earlier, the biggest advance since September 2008, a Labor Department report showed Friday. From the prior month, both the main CPI index and core rate rose 0.2 percent -- matching expectations.
Policymakers are widely projected to lift borrowing costs when they meet in September, with many investors expecting an additional hike before the end of this year. Inflation has made progress, and the unemployment rate, at 3.9 percent in July, signals the Fed is near its maximum-employment goal.
Trade may become a source of price pressures. In picking Chinese goods to target for tariffs, the Trump administration has tried to avoid directly taxing consumer goods. But that’s getting harder to do as trade tensions escalate. A list of Chinese products due to be hit with tariffs next month includes consumer items such as digital cameras, selfie sticks and electric scooters.