Inflation rose again in July, the Fed’s preferred measure of prices shows.
Inflation in the United States rose sharply again in July, the Federal Reserve’s preferred measure of prices showed, a pandemic-related jump that’s expected to fade but will keep pressure on policymakers until it does.
The Personal Consumption Expenditures index, the measure of price gains that the Fed uses as its official target, rose by 4.2 percent last month compared with a year earlier, the Commerce Department said on Friday. The increase was higher than the 4.1 percent jump that economists in a Bloomberg survey had anticipated, and the fastest pace since 1991.
The measure climbed 0.4 percent from June, in line with a 0.4 percent rise projected by economists.
The index, which is based on household spending on goods and services, was released the same day as an annual gathering of economists and central bankers, where Jerome H. Powell, the Fed chair, is expected to speak about the state of the economy. The Fed is considering when and how to begin slowing its large-scale bond purchases, its first step toward a more normal policy setting as the economy heals.
During a July meeting, Fed officials debated over when to slow bond purchases, with some members arguing that it should be done soon to guard against the risk of higher inflation. Others argued for a slower process, stressing that rising Delta variant coronavirus cases posed risks to the economic outlook.
The Fed is still holding interest rates near zero, and officials have suggested that they may favor raising interest rates by late 2022 or — more popularly — 2023. They would like to see the labor market return to full employment before raising rates.
Other measures of inflation have also moved up this year. The Consumer Price Index, a related gauge that comes out earlier in the month, climbed by 5.4 percent in July compared with a year earlier. Wage increases also offer signals about the future of inflation. Average hourly earnings rose 4 percent in July from a year earlier, and wages for nonsupervisory and production workers — which can give a clearer reading on what’s happening for typical workers — have climbed 4.7 percent over the past year.
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