Just about everything—from cars to clothing and furniture to rents—is getting more expensive
Save time by listening to our audio articles as you multitaskAll the more important, therefore, to understand how persistent inflation will be. In this respect the most concerning part of the latest data was not the shocking headline figure, about half of which could be attributed to oil and gas prices, which surged early in June but have since ebbed. Rather, it was the change in core prices, stripping out volatile food and energy.
That reinforces investors’ belief that the Fed will stay on its hawkish path. A day before the inflation data, bond-market pricing implied that the Fed would raise interest rates by three-quarters of a percentage point at its next rate-setting meeting in late July, the second straight increase of that size. Following the data, bond pricing put the chances at roughly 50-50 that it would instead opt for a full percentage point increase.
Neither argument is all that reassuring. Energy prices have weakened over the past month, but with the war in Ukraine dragging on and winter looming, they may resume their upward climb before long. As forinflation, but it is still more than twice as high as the Fed’s 2% target, and rising prices for services such as health care may nudge it higher still.
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