Eyes on U.S. Inflation Reading Despite Focus on Jobs Numbers

The July reading of the U.S. Consumer Price Index (CPI) is set to be released on Wednesday, with expectations for another surge in the inflation rate.

A recent survey by the Wall Street Journal expects that the reading of the CPI will register a monthly increase of 0.5% with core CPI leveling up by 0.4% after both indices reached 0.9% in June.

Meanwhile, the annual inflation rate is seen slightly easing from 5.4% in June to 5.3% last month, with core CPI that excludes food and energy prices increasing by 4.4%, following a 4.5% rise in the previous month.

Earlier today, the President of the Federal Reserve Bank of Richmond, Tom Barkin, said that high inflation this year might have fulfilled the Fed’s criteria for an interest rate hike.

Barkin repeated what Fed officials recently indicated that the central bank is closely looking into the conditions of the labor market before making any moves.

The current Fed guidelines tolerate inflation running above 2% for some time with a goal of reaching sustainable inflation at 2% to achieve price stability.

Barkin thinks raising interest rates will take place when inflation hits 2%, “which I think you can argue it already has, and it looks like it is going to sustain there.”

“There is still room to run in the labor market.”

“The demand for labor continues to outpace the supply of people willing to work.”

“The current pressure on wages is intense at lower levels of the pay scale.”

It is worth noting that data showed that the United States economy created more jobs than previously expected last month, recording 943,000, with the unemployment rate decreasing to 5.4% from 5.9%.

Atlanta Fed President Raphael Bostic thinks that the Federal Reserve should begin tapering the massive asset purchases following two consecutive months of strong job creation.

“My sense is if we are able to continue this for the next month or two I think we would have made the ‘substantial progress’ toward the goal and should be thinking about what our new policy position should be.”

Recently, Former Chair of the Federal Reserve and the current Treasury Secretary, Janet Yellen, expressed concerns about housing costs, expecting high inflation to remain for several months before easing.