US inflation is falling but only slowly
The drip-feed of price data continues to fuel the debate between those who think we have entered a new era of high inflation and “team transitory,” believers in a post-pandemic spike that will recede. The US consumer price index (CPI) for July, as reported by the US Bureau of Labor Statistics (BLS), showed a marked decline in the year-on-year rate, with the month-on-month change at zero.
How does this change the outlook for the rest of the year? Our chart below models how the CPI could evolve. Even if we have falling month-on-month inflation for the rest of 2022, inflation will come down only gradually and remain significantly above the Fed’s target. (That target is a 2 percent figure for the “core” personal consumption expenditures (PCE) price index, which excludes food and energy.)