The Consumer Price Index, a key measure of the cost of goods and services, dropped slightly due to a decline in record-high fuel prices which drove the previous month’s historic inflation spike. The increase also beat expectations as economists surveyed by Dow Jones expected headline CPI to increase 8.7 percent year-over-year in July.
Excluding volatile food and fuel prices, core inflation rose 5.9 percent annually and 0.3 percent monthly.
The average national fuel price stood at $4.010 per gallon as of Wednesday, down from a record-high $5.016 in mid-June.
Despite the slight relief offered by declining fuel prices, the Federal Reserve is still expected to further raise interest rates to bring inflation closer to its target of 2 percent.
Voters across the country consistently rank inflation as one of their top priorities going into November’s midterm elections. Republicans have consistently highlighted the Biden administration’s aggressive spending, arguing that the $1.9 trillion Covid-relief bill passed weeks after Biden took office overheated an already hot economic recovery.
While Biden has repeatedly denied that the package contributed to record inflation, even calling the idea “bizarre,” the moniker attached to the Democrats’ latest spending bill — The Inflation Reduction Act — at least nods toward voters’ concerns, though non-partisan analysts have said the legislation’s impact on inflation will be negligible.
The $433 spending bill, which passed the Senate over the weekend and is expected to be signed by Biden this week after passing the House, includes $369 billion for climate initiatives and another $80 billion to double the size of the IRS. It also imposes a 15 percent corporate tax on businesses worth more than $1 billion.
Markets reacted positively to the Wednesday CPI numbers, with Dow Jones up more than 500 points as of 8:50 a.m. CDT and government bonds down sharply.