A key inflation gauge again climbed 5.4 percent in July from a year earlier. Prices gains are expected to moderate — the question is by how much and how quickly.
Consumer prices rose at a rapid clip in July as the reopening of the economy kept inflation elevated at levels that are making officials at the Federal Reserve squirm while posing a political problem for the Biden White House.
Prices increased by 5.4 percent last month compared with a year earlier, the Labor Department’s Consumer Price Index showed on Wednesday, matching the prior month’s increase. The gains are beginning to moderate on a monthly basis, but inflation remains much faster than it was before the pandemic.
Underpinning the pop is a rapidly rebounding economy, which has recovered to its prepandemic size remarkably quickly as consumers emerged from lockdowns and spent heavily on everything from cars to vacations. But with supply chains disrupted, some industries have struggled to catch up with that booming consumer demand, and that’s leading to higher costs for cars and other goods and services.
Economists expected that prices would pick up this year after inflation slumped in 2020, but the extent of the jump has come as a surprise. Gains are widely expected to begin cooling, but the key question for the Fed, and for elected officials in the White House and on Capitol Hill, is just how much and how quickly they’ll slow down.