US Inflation Balloons: 2.9 Pct Over Past 12 Months

Core inflation spiked 2.9 percent over the last 12 months, essentially flattening wage gains that had edged into the last several months’ economic reports. The July jump is the biggest pick-up the index has seen in a decade, and is considered another piece of evidence that the Federal Reserve should proceed carefully with an interest rate increase.

The core measure of the CPI (Consumer Price Index, which excludes items like food and fuel) was up 2.4 percent from this time last year – the largest annual increase since September 2008. The previous month’s CPI was up a scant .2 percent.

The biggest increases were seen in the cost of housing, where consumer demand is pushing inflation. A 0.3 percent jump in shelter costs accounted for about 60 percent of the increase in the overall CPI last month, the Labor Department said. The potentially looming trade war threatens to lift the prices of goods that had previously been low. There are already at least two more rate hikes planned by the Fed for 2018, which means pocketbooks already under pressure from inflation will likely feel more before the year is out.

And wages, it seems, will not be consistently increasing through the end of the year. Labor Department figures released last week indicated that wages were essentially equal between June and July and are actually down .2 percent year on year.

The CPI is not the Fed’s preferred gauge for measuring inflation – they tend to prefer a consumption-based figure that runs a little bit below the CPI. That index shows inflation has been at or above the central bank’s guiding goal of 2 percent inflation since March of this year. The Fed, according to reports, believes core inflation is ultimately the more reliable indicator of price pressures.